Mortgage in Spain

[gregory]

Hi all,
We are a British couple who are looking to purchase a Farm/Finca in the near future and we are going to Spain on the 16th Feb to have a look at some properties. We have just been advised that we may be unable to get a mortgage to buy a rural/rustic property in Spain, as most lenders will only give mortgages on new/urbanization properties.

Does anybody have any experience of this
Bye

 

[harrison]

Hey Gregory,
There are two kinds of mortgage, one as a non resident which you can borrow approx 70% and as a resident 90% +. Of course they will also want evidence of income. On fincas they do a valuation so if the finca needs renovating they will only lend on the actual today worth of the building, no extras for improvements. A friend of mine who has a successful business down here met this problem. Anything over 20 years old they class as old. I have just brought a finca, but the location is good, as I have sea and valley views and not far from Marbella, so it should hold its value. If you buy in some hick town away from anywhere you may have a problem. When you are borrowing don?t forget to add the 10-12% taxes onto the price also, some people forget. Also make sure of electricity, water, phone, as in some areas people have been waiting 3 years for a phone...... This applies on the Costa Del Sol. In Valencia you have to watch about land grabbing, i.e. they can take your land from you for developments etc, I hear their are more problems in that area. So be careful.

The banks will do their own surveys of the property, but make sure you have a good lawyer also, as I have heard sometimes the property title isn?t always transferred to the new owner which can cause major probs. So a good lawyer is essential.

Before buying, spend some time in the area to see if you really like it do your homework and be careful who you trust, especially other English or foreigners. Learn Spanish as soon as you can, if you are living in the country the natives won?t speak English, and you will feel isolated otherwise and less independent. Another tip is to find out when you buy who the current owners use for plumbers and other tradespeople, as the person will have knowledge of the property.

Good luck

 

[greg]

Gregory,

I must agree with the others. Banks have become tougher lately with mortgages and especially rustic and commercial property buyers are noticing this! Start your research at the banks, then once you know how much they would give you go for the property hunt.

Good luck

 

[eyeonspain]

gregory, I don't see why you worldn't get a mortgage. The only thing is that the mortgage is relative to the value of the property, not the price at which you buy it, so it depends on the value that a valuer will give it.

Probably best to speak to a good broker as some banks have limited mortgage products to offer.

Regards

Justin
Spanish property forums - Talk to buyers of off plan investment property Spain

 

[SharonW]

Hi Gregory,

There are many banks that will lend on 'rustic' properties, some up to 80% LTV. However all banks have different criteria. Some will lend on LTV regardless of purchase price, some will lend on LTV but to a max of purchase price, some will lend on purchase price or valuation, whichever is the lower!!

It is also important to note 2 things:

Some banks will only lend on the building, not the land.
All banks will only lend on the registered, legal size of the property.

The Nota simple for a property will confirm the last point. Always use an independant for your purchase.

Hope this helps!

Regards
Sharon
[email protected]

 

[DC]

I think it would good to get a mortgage experts view on mortgages in Spain.
There are 2 main products in Spain - Interest only or capital repayment mortgages in Spain.
Borrowing Rates differ if you are resident or non resident.

There have been some aggressive new products like interest only, self certified mortgages up to 60% of the property price, or 30 year interest only.

Mortgages normally are calculated on an official valuation done by the banks valuation team. Different banks can have different valuers, so a valuation done by one bank may not be valid for another.

If you want a standard or typical mortgage then you will have to provide proof of income etc.

The banks *in my opinion, are not as good as UK banks for financing. But interest rates are lower in Europe, by about 1.25% so it is still probably better to finance in the EU.

The benefits of a mortgage is that it cuts your wealth tax you pay each year, inheritance tax, and by taking a mortgage as a buyer, you have more security in a deal. Why, because the bank wont give you money unless the property is correct.

So when you get a mortgage. Normally you pay a set up fee 0.5% to can be as high as 3 or 4% *rip off, 1% is about the norm.

If you need advice, send me a PM etc.

 

[DirectEstates]

Mortgages on Fincas

Hi

This is almost correct, it depends on the property really, does it have an existing mortgage for example? If so, the mortgage company would not lend against the property until that mortgage is cleared, they do mortgage properties in the country but you cannot borrow as much on country properties compared to villas/townhouses/flats in towns or cities.

Perhaps we can help you at Direct Estates, we have a good mortgage calculator featured on our website.

The best way to find out if you can mortgage a property is to get the mortgage company out to see the house, view it and value it, get yourself a good lawyer and get a copy of the Nota Simple and Escritura to him/her so they can assist you.

Direct Estates Calahonda

 

[DC]

Can any one else contribute on mortgages

 

[anna2]

You shouldn't have a problem getting a mortgage for a rustic property. Your income situation is more of a factor than rustic vs new build. One thing I would say is that developing a good relationship with your bank manager is much more important in Spain than in somewhere like the UK. A good lawyer is essential but use your common sense in terms of assessing the threat of a new development coming along and ruining your purchase.

 

[Gerry Pridham]

Hi guys,

I've recently been appointed as an agent of Solbank and of Halifax, though my experience is only in Fuerteventura in the Canaries, the agency is for whole of Spain. Happy to pass any information I have without obligation.

Halifax is a particularly good deal for UK expats, provided you can prove income. They will do up to 15 years interst only and for non-resident, they will lend up to 70% of loan to value (bank valuation) OR 80% of loan to cost (which is purchase price plus all taxes and costs) whichever is lower.

Rates are normally fixed for one year and relate to Euribor (either monthly or annual Euribor rates) and are typically Euribor +1% to Euribor + 1.25% for non-resident depending on LTV and customer credentials. Rates are cheaper for residents, but the acceptance criteria are different.

I think the best thing Halifax offers (for Brits) is a dedicated UK contact, and all documentation in English language.

Solbank, on the other hand, are a bit more flexible with customer forms. But both banks require what you would expect to provide in the UK, i.e.:

proof of income
letter from an accountant verifying your income
Experian credit report

and if you own other properties, a list of addresses, values, mortgages, income and lettings contracts.

 

[Moneypenny]

Mortgage Information

Here is some information that may help you;

Any property in Spain that is classed as RUSTICA (defined on the land registry slip known as a NOTA SIMPLE and this is held by the agent or the vendor) is always more difficult to obtain a mortgage on than an URBANA property.

Why? Because there may be doubt over permissions granted many years ago and becasue there is less of a pool of people wanting to buy these properties and this may make it more difficult for the lender to sell the property on if they reposess.

There are lenders who will provide a mortgage on the properties but it is more on an individual basis rather than using the banks traditional criteria but in the current 'risk adverse market' you would be unlikely to pick up more than 50 % of the purchase price in a mortgage. You will also not be able to get a self certified mortgage(no proof of income) on a RUSTICA property or a self certified remortgage in the future.

On the positive side a lot of RUSTICA properties have been re-registered as URBANA so this increases your possibilities.

If you can cope with 50% or less as a mortgage then start your search, and ask for the nota simple for any property that you are interested in. Pass this to a reputable mortgage broker to review and becasue of their expereince they will know if the property and your income will get a mortgage, then you can move forward.

If the 50% is definitely not going to be enough then still look at rural areas but advise your agents that you can only consider URBANA registered properties.

I hope this helps

 

[MPG]

Mortgages on rustic property (finca)

Hi there,

As a non-resident you will be able to obtain a mortgage of up to 70% of the valuation of the property. As a resident 80% plus. FACT.

I am a resident and bought a finca with a mortgage equivalent to 80% of the valuation.

Regards,

MPG

 

[DC]

Different banks, different conditions, different times

Pre credit crunch, banks were offering 90% loan to value, in some cases 100% mortgages, and properties had higher valuations.

Post crunch it is a little different, valuations are coming off, banks are far more cautious who they lend to, impacting the markets and bringing prices off.

Some banks are not even doing some mortgages. Some of the products interest only 30 years, were withdrawn.

So what is fact today, may not be fact tomorrow, it depends on conditions of the market, if the bank is a bank or a caixa, caja, their current market situation.

There are variations in the markets between banks.

 

[MPG]

Post crunch it is a little different, valuations are coming off, banks are far more cautious who they lend to, impacting the markets and bringing prices off.

Some banks are not even doing some mortgages. Some of the products interest only 30 years, were withdrawn.

I agree with above comments. It has become more difficult since December, however I maintain that you can achieve up to 70% non-resident and 80%+ on resident mortgages for rustica property, not only urbano.

 

[darlawlor]

Mortgage for Re-Furbishment

Hi Folks,

I am currently toying with the idea of refurbishing a property I own in a village in the Alpujarras. I was wondering what mortgages are available for such a project. Our intentions are to demolish and rebuild and we were looking to borrow in the region of €70k.

 

[rowlandsbb]

I am not a mortgage broker just an agent who has been a dealer/ investor in UK and Chartered Surveyor but may I suggest that you treat it like a ' professional project'

Get all your plans, building estimates, licences and a valuation of 'value now in existing state' and after ' when you have completed the re build'

Also your plans for supervision of the re build , stage payments to the builders and 10 year structural guarantee arrangements

This will show the profit in the project and there normally has to be a good added value to get finance

Prepare an attractive ' Presentation' ..[ English and Spanish] .then go and see if any of the Spanish banks will lend to you

You will need finance for the re build and then perhaps a mortgage afterwards

In other words the same approach you would have for a similar deal in UK

I would have thought that they will want at least 50% security or cash input from yourself just now

And I also suspect that unless you are Spanish, they will be even more cautious

So, it is going to be difficult as you expect...the other alternative, if you are confident of the project added value, is to raise the money in the UK based on UK assets

Or do not do the re build until economic conditions improve but it will be a long time before Spanish Banks are relaxed with finance again!!.................in fact any Bank anywhere

 

[Meter Mike]

I doubt you would get permission to demolish and rebuild on a country property, though it is more likely in a town or village.

Brians advice above is excellent and the only way to go IMO.

 

[rowlandsbb]

Mike

I think you can in certain circumstances and in general it has to be the same footprint and size subject to a small increase

But I would not demolish before having all the rebuild permits and resources to re build

 

[pneumatic]

Hello All,

This website is very helpful. Maybe you can help me please, this is my 1st post....

I am UK resident and have a CAM bank mortgage on a property in Spain, I want to switch my
mortgage to another lender as I am currently paying too much (6.5% interest) per month.

Can anyone please recommend a company that would manage a switch? I know this needs to be done proffessionaly as it is a legal minefield.

Thankyou in advance to anyone who bothers to reply.

 

[Manzanares]

Hello All,

This website is very helpful. Maybe you can help me please, this is my 1st post....

I am UK resident and have a CAM bank mortgage on a property in Spain, I want to switch my
mortgage to another lender as I am currently paying too much (6.5% interest) per month.

Can anyone please recommend a company that would manage a switch? I know this needs to be done proffessionaly as it is a legal minefield.

Thankyou in advance to anyone who bothers to reply.

Pnuematic,
Have you already sourced a new mortage provider ? and spoken to your existing lender to confirm if there are any charges applicable if you switch your mortage at this point ?
We are currently working with a number of clients who own property in Spain who are experiencing difficulties in making mortgage payments etc (we are negotiating with lenders on the clients behalf to reach an agreement that suits both parties, as opposed to clients losing their properties).
If you need any assistance from a legal perspective, or to assist with negotiations and overcome any language barriers then please dont hesitate to get in touch.
Best of luck.