Arranging a Spanish Mortgage
Let’s begin by taking the myth out of obtaining a mortgage in Spain. There is no magic to the process and basically any purchaser can apply for a mortgage by going to any one of a number of banks directly. Some advertise better deals than others but the rates currently on offer are quite attractive when compared with the UK. The majority of bank staff along the costa blanca now speak good or near-perfect English and are familiar with the needs of the English purchaser so my advice is to do the rounds yourself if you have the time.

Benefits of Purchasing with a Spanish Mortgage
Banks the world over will always take a commercial view when deciding whether to lend against a property. Simply put this means that the bank will want to ensure that their loan can be repaid if the property has to be sold at auction. The benefit to the borrower is that a second set of eyes is being cast over the property, as the bank will not want to be lumbered from the outset with an overpriced falling down wreck if the borrower is unable to repay the mortgage. It is vital to bear in mind however that the bank does not need to satisfy itself that a property is 100% okay. Many borrowers assume that a bank’s agreement to lend amounts to a seal of approval. It does not and you should always instruct an independent lawyer to check the property. In the UK the buyer’s solicitor acts for the bank as well as the purchaser, and simultaneously prepares a report on title for each one. This is not the case in Spain however and there is no way of finding out what advice the bank’s internal advisors will have given the local director who arranges the loan.

The bank or lending institution will always insist upon a valuation report being carried out which is beneficial from the purchaser’s perspective. This report is far less comprehensive than a survey carried out by a qualified surveyor however, and there have been cases where a bank’s valuation is deliberately inflated in order to enable the purchaser to borrow a higher sum. This is fine where the purchaser is aware that this is the case, but there are occasions where this inflated value is used to make the purchase seem more attractive to the unwitting purchaser.

Costs
Whilst the interest rates currently on offer are generally quite attractive it is unfortunately the case that a hefty ‘opening commission’ or ‘arrangement fee’ is often charged to the borrower. This can generally be negotiated downwards however, particularly where the buyer has approached more than one bank. The taxes arising from the mortgage make the purchase slightly more expensive overall, but there is a potential inheritance tax saving down the line since the equity owned by the buyers will be reduced by the level of the mortgage outstanding at time of death. There is also a reduction in the income tax payable if you are working in Spain and paying a mortgage on your principal place of residence.

Equity Release in the UK ?
It is important not to confuse a mortgage raised in the UK (secured against a UK property) with a Spanish mortgage. It may be appropriate in certain circumstances to raise the purchase money in the UK, although this will not bring the benefits of added security referred to above nor will there be any potential Spanish inheritance tax or income tax savings.

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Information courtesy of Marc White LL.B. (English Solicitor) - Visit homepage

If you have any questions about Spanish mortgages then please email us: info@spanishadvertiser.info using your spanish advertiser email address and we will endeavour to return your query as soon as possible.