Help with Spanish Mortgages...

We are flying out to Spain in about 6 weeks to look at property.  Should I have the mortgage offer already in place?  I am being told that to even be "approved in principal" will cost £250 by Mortgages4U (UK based, Spanish mortgage).

I'm also unsure of what to do with regards mortgage amount.  I was initially planning to put down a £30,000 deposit and mortgage the rest this is because the lender found by Mortgages4U will only lend it's percentage on the "purchase price" and not the "valuation price".  The advantage of this particular lender is that they lend up to 1/3rd of Net Pay without looking at your existing UK mortgage so approval is (I am told) a very quick/easy process.

However, one of the properties that I am interested in already has a Spanish mortgage in place which I understand can be transferred to a new owner quite easily.  This is with SolBank and I am told that they work on the "valuation price".  On this basis it sounds like I will not need to put down ANY deposit but simply take over the existing mortgage.

This option sounds good because I can keep my deposit monies for something else or simply to help pay the mortgage during lean months (ie no rentals).

However, I had a VERY brief conversation with SolBank as the language was difficult and it seems that they need to go through the application process from scratch - payslips, monthly commitments, existing UK mortgage blah blah blah.  

What should I do?

Find the property first then the finance

Terms in Spain are now very good and can be up to 40 years [ paid off by 80] and with a good deposit can be up to 15 years interest only with no early redemption penalties

On off plan properties you often have the choice to subrogate to the existing mortgage which the builder may have to finance the developments and this can save costs

But often the terms you get are not always the best

Any good  agent will be able to sort out some good terms with a top Spanish bank for you

I give you an example

On  selective developments we have arranged with the developers and a top bank the following terms;

3000 € reservation fee  

15% in 6 weeks

15% in a further 4 weeks

Balance' including all costs' on completion can be financed by a mortgage over a period of up to 30 years

Re sales are a little more dificult due to valuation problems which sometimes arise

So find your property and the finance will follow

I beg to differ Brian and no inference is intended, but you will find that it is actually illegal to finance the purchase expenses under Bank of Spain mortgage lending criteria. Hence the lenders that have flouted the law are all being brought to book and the maximum anyone can LEGALLY borrow as a non resident of Spain is 90% of purchase contract price. There have recently been a number of arrests at Notary where the purchaser, broker and the vendor have been arrested on the day of completion owing to a fraudulent purchase contract being put in place so that the buyer can cover their expenses as well.

As you will no doubt know one of the main culprits in this situation has been advised they can no longerr lend to non residents as they appear to have been the major perpetrators - along with lax checking into fraudulent pay documents and bank statements etc. I am advised they actually wished to declare bankruptcy owing to the level of bad debts and repossession proceedings they were haviong to start and BOS refused to permit them and have appointed their own officials to the bank to get them back on the straight and narrow.

In answer to your question Al Solbank advance on purchase price or valuation whichever is the lower of the two. Of course if the valuation is lower than the purchase price one would have to question whether it was a good deal or not but hopefully that answers any query you might have. You dont mention what you are considering buying so I should also add that many lenders will not advance on rustic property and most have restricted advances - hence that 7 bedroom farmhouse in the middle of nowhere with 100,000 sq metres of land may not be quite such an interesting option of you can only borrow 40 or 50% of value. 

Sorry,

Definately sort out your finance first!!!

We got an agreement in principle from Barclays within two days with no cost involved (won't be using them though as the interest rate is too high). Several others have given us an agreement in principle, we just need to sort out which one to go with now.

Mark

The property I am interested in is all resale rather than off-plan so things are a little different.

I read with interest what has been said about getting a mortgage different to the purchase price.  I was told this was all no problem and that it happens all the time but after reading the comments here I will not be taking the risk!!!

Thanks.

"it is actually illegal to finance the purchase expenses under Bank of Spain mortgage lending criteria."

Smiley

I am confused!

When we were on our inspection visit, much was made of the fact that in buying off plan, the value of the property will potentially increase between reservation & completion. Then, with a mortgage based on the higher valuation, purchase costs could be recouped. There were no limits mentioned.

I have had an Agreement in Principle for 80% of valuation which is 191,978 Euros. The purchase price is 179,000 Euros  & the Agreement in Principal is for 153,600 (which is within 90% of the purchase contract price that you mention).

Is this legal or are my wires crossed?

Thanks

Noreen 

Under Bank of Spain criteria (only recently started to be enforced however) the maximum advance legally to a non resident of Spain is 90% of PCP - hence all lenders now asking to see Purchase Contract prior to issuing offer letter. There are many lenders who have had their knuckles rapped and it is still an ongoing procedure with many of the banks.

If the pp was 179k the legal limit of 90% is 161k - this is restricted subject to lender criteria whether they will lend 60% 70% or 80% of bank valuation which in your situation relates to the advance of 153,600 at 80% of value. So yes your loan at 153,600 is legal.

Hi,

Anyone any idea how I can get on the property ladder with no deposit and no money for legal fees (obviously not a remotely rich man!!!). The omly thing I have going for me at present is that I am no a full time contract here on the Costa Del Sol.

Any advice would be appreciated

How does the old saying go?

A man is as old as he feels, and when he stops feeling he's old .

Mark

Or When it takes you all night to do what you used to do all night

You're the oldest swinger in town

Mark

Patrick, I just need a bit of a bump start then I'm running like a good'n