Financial guide for Spanish property
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Interest rates in Spain are slowly rising, but they’re still significantly lower than in the UK and other parts of the world – which means your money could go a lot further than you think. And when it comes to arranging a mortgage, you could be in for a pleasant surprise when you find out how much you can afford.
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First – get good advice
Before you start drawing up a shortlist of properties, we always recommend that you take some independent financial advice. Our financial partner Green Independent is a company of independent financial advisers specialising in mortgages and insurance.
A free, no-obligation consultation with Green Independent gives you the chance to see what kind of mortgages are on offer, establish exactly how much you can borrow, what the repayments will cost, the price range of properties within your budget, and the deposit you’ll need.
Their team of 28 professional staff is fully qualified according to UK requirements, and works closely with over 40 different mortgage lenders, including major high street players such as Barclays, Royal Bank of Scotland and Halifax.
All Spanish mortgages are full status, and Green Independent can provide you with an agreement in principle in just 24 hours, followed by a letter of intent, which takes 4-6 weeks. Don’t forget to bring all the necessary documentation (you’ll find a list below).
What are the options?
Equity release
 If you are a UK homeowner, with equity in your main residence, it may be possible to raise up to 120% of the funds required for your property purchase in Spain by utilising a combination of equity release and a maximum Spanish mortgage. Re-mortgaging is a good way to take advantage of both the wide range of mortgage packages offering low interest rates, as well as ancillary financial products.
Assuming your UK property has increased in value since you bought it, you may well be able to raise additional cash… and still reduce your monthly payments.
If sufficient equity can be generated from your UK property, you could raise a 20% deposit with your existing lender (or alternatively Green Independent could arrange a UK re-mortgage for you), with a Spanish mortgage covering the remaining 80%.
And should you wish to buy a plot of land, the purchase could be financed with a variety of finance products, including equity release, with 100% of the building costs financed in stage payments.
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Non-Spanish residents
- Depending on your age (most loans have to be repaid before reaching 75), you can expect a mortgage term of up to 30 years.
- Mortgages granted are normally up to a maximum of 70% of the valuation price, however, 80% is possible with guarantees. And if you are buying off plan, this is based on the property value on completion, not while it’s still being built.
- On rustic properties, mortgages of up to 60% are available.
- Mortgages are based on being able to spend a percentage of your net income between 35% and 40% on your mortgage payments.
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Spanish residents
(This means you hold a Residencia card and are paying both national insurance [Seguridad Social] and tax in Spain.)
- Loans of up to 85% of property value (and with guarantees, 100%).
- Mortgages are based on a net income multiple of up to 50%.
- On rustic properties, mortgages of up to 60% are available.
- Equity release of up to 50% in the event of outright ownership of a Spanish property.
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Case study: Income/Mortgage/Monthly repayments
A mortgage of 200,000€ can cost as little as 608€ (approx. £420) a month interest only (interest rate quoted: 3.65%). The equivalent mortgage in capital and interest over 30 years would cost 914€ (approx. £630). To qualify for this, you would be required to show net earnings in the region of £1,500 per month.
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Additional information
- Euro, Sterling and US Dollar mortgages are all available on a repayment, interest-only, basis.
- Spanish lenders assess loan eligibility on the applicant’s ability to service the loan, and not on any potential future rental income.
- Subject to status, mortgages are available for the following types of purchase: off-plan, existing freehold, rustic, new build, or property in need of renovation.
- On top of the purchase price, you should also budget for additional costs (legal fees, IVA or property tax, notary, registration, etc.), of approximately 10% of the purchase price.
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Documentation you will need to apply for your Spanish mortgage
In addition to your passport(s), you will also need to have the following documentation to hand when applying Spanish mortgages:
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- Proof of UK residence (e.g. driving licence, council tax receipt)
- Six months’ personal bank statements illustrating declared income and outgoings
- Three most recent wage slips, plus your latest P60
- If self-employed, audited accounts for the last two years
- Last two years’ tax returns and a letter from your accountant confirming your income and tax payments for the previous year
- Proof of any other sources of income that you may wish to borrow against
- Copy of any tenancy agreements on buy-to-let properties
- Details of any pension you may be receiving .
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See what you could afford with our mortgage calculator >
Please note:
As with everything to do with your money and property, you should always take independent advice before entering into any kind of agreement. The article(s) above are written based upon our understanding of the facts but do not constitute financial advice of any description.
Currency exchange
If you do not live in Spain, and you need to make payments for your property in Euros, you could benefit from massive savings by using a reputable currency exchange company such as Moneycorp. Moneycorp can help you achieve the best exchange rates making your money go further. They can also offer a range of services that will help protect you against adverse currency fluctuations. Moneycorp Currency Exchange >
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Where next?
For more information on financing your Spanish property, please leave us your details below, and we will put you in touch with our finance partner Green Independent for a quick consultation on your personal circumstances. Once you know how much you can afford, you will be one step closer to finding your dream Spanish property.
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