Typically 3% for the first two years fixed, or linked to Euribor. Borrowing based on 70% LTV.
Typically after two years and linked to Euribor.
If you are thinking about buying in the Costa Del Sol, it’s absolutely essential, to be financially prepared before you start looking.
Often buying in Spain, can be very time sensitive. There is nothing worse than seeing the house of your dreams and then, being pipped at the post by someone who has their finance’s in order. Popular properties and particularly, repossessions can sell very quickly.
Often the plan might be to buy something initially as a holiday home and then move there once you finally retire. If that is your plan just make sure, that you buy something big enough to be functional for when you do move permanently. Buying and selling in Spain can be expensive, so even if it means taking a smallish mortgage now, it’s better to do that, rather having the cost of having to move in the future.
If you are going to need a mortgage, the first thing to say is that Spanish banks, normally look for proof of a deposit, so if you need to remortgage in the UK to release these funds, the best advice is to have any re-mortgage in place before applying for finance in Spain. Try to do both at the same time and Spanish banks are likely to consider it to be 100% funding and they will decline your application.
It might seem very complex, but the La Luna team are here to make things as simple as possible. That why we work with very best brokers, both in the UK and Spain. If you need advice on releasing funds from a personal or occupational pension, we can also point you in the right direction.
How to buy in Spain
Here are some handy tips and hints for you. First of all, it’s all about getting your financial commitments in the UK down to as small a figure as possible. Spanish lenders work on an affordability basis. They don’t want to see your existing UK commitments, plus your new mortgage in Spain exceed 30%, or at the absolute maximum, 40% of net income. So, if you are re-mortgaging back home, make sure you consider tidying up all your outgoings into one mortgage payment and over as long a period as possible. Most lenders in the UK, will now look at a mortgage term up to age 70 and if you currently pay a pension and are aged 59 or below, a couple of lenders will even stretch as far as age 75.
Rates in Spain aren’t as keen as the UK, nor can you borrow as much of a Loan to Value. The absolute maximum is 70% of the purchase price or valuation, whatever is the lesser. It’s best to work on a rate of say 3% in the first two years, then dropping to somewhere closer to 2.5% for the remaining term of the mortgage. All linked normally to Euribor, which is the European equivalent of our base lending rate, set monthly by the Bank of England.
Spanish banks like you to take as many products from them as possible, this also has the effect of improving your rate. These would include for example a current account, buildings and contents insurance and finally life insurance. The latter can be much more expensive than similar cover in Britain, but normally, if you want a mortgage, it’s a non-negotiable. A good broker is vital. Working on your behalf, they are looking to obtain the best possible rate and conditions. Using their knowledge and connections, you really can literally save €thousands over the term of the borrowing.
Mortgage terms in Spain tend to go from 20 years, to an absolute maximum of 30 years, but unlike in the UK, they are based on the age of the youngest applicant. Very handy if you are perhaps in your 50’s or 60’s and have children who are working in full time employment. This can be useful for affordability too.
In terms of documentation, it’s pretty much what you would expect. A statement of assets and liabilities can be a good idea too. A quality application can often result in slightly better lending terms. Remember too, you will need a copy of your credit file. We would recommend www.noddle.co.uk it’s free for life and very easy for lenders to understand.