Acquiring a mortgage.

In process of setting up a mortgage.  Have heard Halifax are good, they are specialising in an interest only mortage.  Any knowledge or advice welcome?

Thanks.

Hi, before doing anything speak to "Smiley" on this site, he has been extremely helpful with us - a real genuine great guy! Inter5est only mortgages are available.

Regards M

Have you discounted the developer's mortgage as an option then? Don't you incur a 1% cancellation charge if you don't take up this option, or is this now deemed to be an abusive clause in the contract?

Anne

Hi Anne

We were told if we did not want to take up the developers mortgage there was no problem, they would pay the cancellation charge.  However, we did look into the developers mortgage but unfortunately could not get an interest only mortgage.  With Smiley (marbella mortgages) we are hoping to achieve a 15 year interest only mortgage which suits us better than repayment.

Regards M

Its not only the cancellation charge which makes the developers mortgage favourable, there are other items but cannot recall them . However my developers morgage was with Banco Andalucia and i was easily to change the terms of the mortgage. I would suggest checking with the developer's first before deciding.

If you pm me i can give you the manager's email address.

Its not only the cancellation charge which makes the developers mortgage favourable, there are other items but cannot recall them . However my developers morgage was with Banco Andalucia and i was easily to change the terms of the mortgage. I would suggest checking with the developer's first before deciding.

If you pm me i can give you the manager's email address.

Lawyers went through Banco Andalucia on our behalf, would only consider re-payment, thats why we didnt take it up

However, are very happy with what we have been offered by Smiley

Regards M

What mortgage interest rates are the Spanish banks charging these days?

Anne

Many thanks again John.......

Anne

Sorry, another question!!......if you change any of the details re the developer's mortgage (be it interest only options/ extention or reduction of term or amount required etc etc) then don't you lose many of the benefits with their additional charges?

Anne

I dont think I did..in fact I changed the term and amount with no loss of benefit

john

Ads,

Spanish lenders tend to charge Euribor + their margin. Euribor rates tending to be set for either 3, 6 or 12 months depending on the lender. At the end of each 3, 6 or 12m period they are then renewed at the prevailing Euribor rate for the period on that date. The Euro base rate is currently 4%, but Euribor rates will be slightly different (currently higher) & can vary for each period day by day.  Sorry if this explanation confuses.

The banks margin will/can vary depending on the terms of the mortgage & the customer status. There are one or two low start up/discounted rates around, but if attracted to these, make sure that they don't jump significantly after say 2yrs, as remortgaging in Spain is more difficult & far more expensive than the UK.

The Developers Mortgage on Phase 3 is with a different Bank, Caixa Catalunya. My initial discussions with them suggest that they will also be flexible on terms, without loss of benifits & are also willing to offer an initial interest only period although not for the full term.

I will try & find out current Euribor Rates & post them latter.

John 777

Re previous post, todays Euribor Rates are:-

3m 4.506

6m 4.565

1 yr 4.645

John

This is really useful thanks. I noticed that the developer's mortgage for phase 3 is now with a different bank.

Am I right in assuming that mortgage interest can be offset against wealth tax?

Given that Spanish mortgage rates have increased does it still make finanacial sense to take up a Spanish mortgage option as opposed to using UK savings?  (At one time the advice was to keep your UK savings to accrue interest at a far better rate). Now, taking into consideration that the rates between the UK & Spain are not that significant, plus the upfront costs and overheads associated with a Spanish mortgage and managing the currency fluctuations, I'm not so sure it does make sense anymore.

Anne

Anne,

Sorry don't have suffcient knowledge of the Tax situation to feel able to answer.

Re borrowing in £ or Euro, there is not a correct answer & situation will be different for each individual. In particular whether or not you will have any income in Euro's (rent etc, either commercial letting or just friends & family). It will also greatly depend on what happens over the life of the mortgage & not just the short term situation re interest & currency rates.

If you borrow in £, to be able to reduce potential inheritance tax in Spain, I believe the loan would still need to be against your Spanish assets & hence based in Spain. Number of Banks will lend in sterling in Spain though eg Halifax, RBS/Natwest/Barclays etc.

The base rates for both £ & Euro are both predicted to rise 0.25% over the next few months or so. Hence the difference bewteen £ & Euro base rates, currently 1.75% is likely continue, certainly in the short term. On exchange rates, their is a prediction that the Euro will strengthen against £, so transferring £ to Euro could also cost slightly more. Currency predictions though are frequently not as accuarate as the interest rate predictions.

John

I took Banco de Andalucia Mortgage and changed to 1st year interest only and paid 0.9% fee upfront to get better rate I think and I have no walk away cost. If I did it the other way it was 0.25% set up and 1% walk away. OK so I paid more up front but I will only walk away if I can and want to pay it all off or switch to a low cost rate to save money.

My view was to keep any spare money in a UK high interest rate account 5% plus in my wifes name (to maximise tax usage)and pay a lower rate mortgage in Spain keeping IHT and other costs down.

My understanding is Inheritance Tax is only on the bit you own e.g 30% with 70% mortgage. Obviously this will  change with repayments.

I was looking at some Patrimonio Renta paperwork (Modelo 214) and it looks as if the Patrimonio (wealth tax) is only calculated using the portion you own, this makes sense but don't know if this is true. Does anybody else know?

Thanks to all who have posted - much appreciated.

Has anyone tried to take out a sterling mortgage on their Spanish property and if so could they comment on the relevant costs and rates. Is this considered an unusual or cost prohibitive option? Presumably taking this route would also qualify for IHT relief (tapering during the mortgage term) and potential to offset against wealth tax?

Could anyone comment on the associated annual insurance costs for say a 2 bedroomed apartment (life- to cover the mortgage term,  and property-contents and building). Is the building insurance covered within the community tax or do individuals have to take out their own cover? Can these costs vary significantly with different lenders or do they tend to be within a similar price range? Perhaps you're not given a choice when you take out a mortgage and you have to take the bank's insurance????

Cheers

Anne

RE the "Banco de Andalucia Mortgage and with to 1st year interest only..."  

I did a complex DCF  comaring that offer against the developers   using a number of scenarios for duration and interest rate movement.

Overall they were very similar in net terms - no surprise.    One key factor is the expected duration of the mortgage / keeping the apartment.

Because of the lower transaction costs of taking the developer's mortgate, that option  was clearly financially advantageous if you plan to be selling within 4 years.