Flexible
mortgages are now available from a wide range of well known lenders. These
recalculate the outstanding capital and interest daily allowing you to make
overpayments on the outstanding loan whenever possible. Mortgages are also
available which permit you to take a break from payments thereby increase the
interest payable. A complete break from payments may also be arranged as long as
there is an adequate balance in your account.
Getting the mortgage If
possible, buy your Spanish property outright. That way obviously you own the
property and avoid increasing your existing mortgage debt. If a mortgage is the
best way for you to purchase a Spanish property one can simply add to one's
principal mortgage or take out a new separate mortgage on your foreign property.
Increasing your existing borrowings is probably one of the cheapest options.
Alternatively one can consider a second mortgage on your new Spanish property or
holiday home.
Having a Spanish mortgage doesn't automatically involve dealing
in foreign currency. Abbey and Barclays offer buyers of foreign property euros
or sterling loans. If you intend to rent out your Spanish property the rent may
be received in euros in which case a euro mortgage allows you to offset the rent
against repayments.
Obviously if you choose not to rent out your Spanish
property but still have a euro income of other sorts then a euro loan is
sensible. However those earning sterling in the UK will find a mortgage in
sterling a sensible option. This way you needn't worry about exchange rate
fluctuations. The majority of euro mortgages will be of the repayment type and
also with repayment periods shorter than British loans. In Spain, many have a
term of 15 to 20 years. Clearly this will impact on your monthly payment amount.
loan-to-value ratios will usually also be lower and therefore may restrict the
amount of available Spanish funds. Around 75% may be the typical LTV.
Different types of lenders There will always be more than one type of lender for
a second home or Spanish property . You have a choice of the large Spanish banks
such as CAM, BDV and Solbank as well as almost all UK lenders. The Spanish banks
are very keen to arrange mortgages with non Spanish borrowers. All the major
Spanish banks have branches located in almost most mid to large size towns both
inland and along the length of the Costa Blanca. Their staff will speak English
and will guide you along all stages.
Your Spanish property will serve as
collateral against the loan i.e. the bank's security. Loans of around 70 -80%
are commonplace. Beware though that the bank will impose fees of around 1%-2%
(arrangement) of the advance and around €200 to €400 for the valuation survey.
Many recognised high street UK banks have branches in Spain for example Abbey
and Barclays as well as the Royal Bank of Scotland. These are staffed by
Spaniards almost all of whom will speak English and are well trained in the
provision of financial packages to purchasers of Spanish property.
Many
specialist mortgage brokers also exist and these are worth talking to in order
to locate some of the more competitive mortgages.
Your buying checklist Don't
forget to add around 10% to the property price to cover the unavoidable costs of
the transaction.
Which location? Use (almost!) the same criteria you would
when looking at property in the UK. Is your preference for rural, village, town
or bustling resort? Just how important is proximity to the sea? Ditto shops,
hospitals etc.
Most importantly, familiarise yourself with the region. Go
there, hire a car and become knowledgeable about the various Spanish towns and
villages in the area.
Check what services the property is connected to.
Establish whether connections already exist for gas, phone, electricity and
water. Can you get broadband Internet?
Talk to the people you meet there.
Question them on the area. It's pros and cons.
Variety is essential - view a
VERY broad selection of properties. Without this you will lack any real
perspective of the market and what is available within your budget.
Regarding
any properties which are part of an 'urbanisation' discover how much the
community fees are and when payable. Try to talk to the president of the
community. Visit the town hall planning department to establish what if any new
development is intended in the vicinity (or within view) of your property.
ALWAYS appoint an independent, English speaking solicitor. There are plenty.
This is essential.
The actual process of buying a Spanish property Firstly
there will be a deposit to be paid - negotiable between ?2000 and ?10,000 and a
purchase contract to be signed. This is known as the 'compra venta' and is a
binding agreement which details the sale and the date by which you agree to
complete.
When you complete on the property, everyone involved will convene
at the notary office - a government official charged with overseeing the
transaction and the witnessed signing of all binding documents. It's at this
point that the deeds (escritura) are signed. On signing the escritura one must
then pay the outstanding purchase amount including all legal fees and taxes etc.
This includes 7% of the agreed price on new properties or of the escritura value
on a resale property.
After this stage, the necessary transfer taxes and fees
are paid.. The new ownership (transfer of ownership) will be registered by the
notary. This is done with the Land Registry.
This registration document is
known as the and "copia simple" and you should ensure that you receive a copy.
Additional info regarding taxes and other costs Combined purchase costs, taxes
and Solicitor fees will usually equate to around 10% of the purchase price. This
will cover advice on the contract, the investigation of the property title, the
report on any enquiries undertaken, handling of tax payments and the procedures
required for your final completion and property registration. The fees to be
paid to the notary may be between are around €250 - €475. Land Registry will
cost approx. €240. Clearly there may be other costs such as your surveyor, or
those incurred with banks. These will vary from case to case.
Ongoing living
costs in Spain typically will include Urbanisation or "Community Fees" for
general upkeep and insurance of the community and shared areas such as gardens
and pools.
Local i.e. town hall related taxes include a "wealth" tax or
'Patrimonia'(around 0.2% is typical), property tax and the "IBI" - a yearly form
of property tax. Like council tax this varies depending on area. Often this will
include charges for rubbish collection. Insurance. Comprehensive insurance is
obtainable from many insurers. Utility fees such as electricity and water.
Other considerations It is usual for property owners to appoint a "gestor" or
"fiscal representative" to handle your admin. and other fiscal affairs. One
other essential document is your will. Make a Spanish will. It might cost around
€150 but is vital to represent your interests in Spain.
When choosing a Spanish bank account always study the maintenance charges as
they vary a lot from company to company!
