FREQUENTLY ASKED QUESTIONS
How much can I borrow?
Lending in Spain is based on the valuation of the property and usually your income details. For urban properties, you can borrow up to 95% of the valuation if you are non-resident and up to 120% if you are resident. These percentages may be lower for rustic properties.
Lenders also look at your ability to pay and typically allow 35% of your net income after tax to pay for your monthly mortgage payments. If you have loans, mortgages or debt in the UK, it is most likely that this will be taken into account. In most cases, we can still help clients where this becomes an issue.
Can I do 'Buy-to Let' in Spain?
There is no equivalent in Spain, as lenders will not usually look at future rental incomes. However, if the property has already been rented and there is proof of this, it is likely this can be taken into account.
How much will it cost?
In brief, we suggest you should allow 11% of the purchase price to cover all costs. These include Transfer Tax (7%), Bank Opening Fee, Valuation, Mortgage Direct, Notary and Land Registry fees. Some companies quote higher figures here, but we believe the level of our charges means an allowance of around 11% is reasonable.
How long does it take?
Once all documents have been received from you to take out a mortgage, and assuming there are no problems with the valuation report, we anticipate the mortgage process will take approximately 4weeks.
Do I need a Lawyer?
Strictly speaking, the answer is no, however, we strongly recommend that you do appoint one to protect yourself against the pitfalls of buying property abroad. They will ensure that all the necessary checks are carried out. Also, completion of the mortgage cannot take place until you have applied for an NIE number, which your Lawyer can obtain on your behalf.
What is the best type of mortgage?
This will depend on your circumstances. For example, if you are self-employed and have no proof of income, you may require a self-certification mortgage. Or, you may wish to pay off your mortgage early and avoid redemption penalties. You may be retired and require an extended term on your mortgage to age 80. But with all this in mind, you will want to keep your payments for a mortgage to a minimum. We will find you a competitive rate of interest and not deal with banks that charge more than a 2% Bank Opening fee.
How do I repay the mortgage?
In most cases, the lender will ask for a repayment mortgage, which means the monthly payment is made up of both capital and interest. The repayments pay off the interest and the initial amount borrowed. Your mortgage will be paid off at the end of the term. Some lenders allow you to pay interest-only. In which case, you will have to find your own investment vehicle to pay off the capital sum at the end of the mortgage term.
Is there a redemption penalty?
In most cases, there is a redemption penalty of between 0.5% -1% of the amount borrowed if you pay off the mortgage early or re-mortgage with another lender (this may be higher in some cases where a fixed rate has been chosen). However, there are lenders that avoid this cost altogether if you feel that you want this facility built in to your mortgage.
What rate will I get?
In most cases, your interest rate will be variable based on Euribor, plus an additional percentage amount. For example, if the Euribor is 3.5% and the lender asks for Euribor +1%, your rate would be 4.5%. Your payments would be reviewed (usually every 6 months) and an adjustment made to the monthly payments to take into account any movements in the Euribor.
If you prefer, you may be able to get a fixed rate, which means your payments would remain the same throughout a fixed period. In Spain at present, fixed rates are quite expensive and variable rates are the norm.
Do I have to have insurance?
With most banks it is compulsory to have buildings insurance and this is often taken up with the bank that lends the mortgage finance. We strongly advise that you have contents insurance and life cover to protect you or your family in the event of a burglary or death. You may even wish to consider taking out accident, sickness and unemployment insurance. We can help you with this if you would like us to.
What happens after completion?
The Escritura is normally available within 3 months. This will be available from the Lawyer with the new owner legally registered.
If we have not answered your question, please e-mail info@mortgagedirectsl.com and we will endeavour to answer it for you.
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