subrogation fees

We are taking out the developers mortgage.

If the subogation amount is 157,000 euro, the bank says that  notary, land registration, and tax comes to 4,600 euro, as well as a set up fee of 0.75%

I thought that as the mortgage is a subrogation there should be no stamp duty on the loan amount, and notary and registration fees shuld be halved.  This should work out cheaper than the above 4,600

Could someone clarify this please, and tell me how much the mortgage fees should be.

They have alos qouted 1,200 euro for life insurace for us ( how they managed to get this qoute with no medical questions I dont know). We are only, 32, and 39 years old. Does this seem expensive. ( I know it is generally said that mortgages shouldnt be offered subject to life insurance - but in alll honesty if this amount isnt too exceptional it will be easier to stick with the bank at least for the first year)

They are alos asking for a one off protection of property insurance of 241 euro to cover the property should it need to be knocked down ( as has happened to prev owners in Spain)- Surey we dont need this, after all the bank should be satisfied that all regulations have been followed as they loaned in the beginning!
any help apreciated
many thanks
louise

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In theory if you are subrogating the developers mortgage then all the Notary costs and taxes associated with the mortgage should have been paid by the developer unless of course  you are varying the terms of the mortgage or the amount or anything else. Unless of course there is something in your contract that states the mortgage costs will be borne by you but that would really be a developer pulling a fast one. Life assurance at 1200€ per annum is costly - we had a situation where a lender insisted and the premium was knocked down to 370€ for an older couple than yourselves - to be honest we dont like lenders life cover and will only use lenders that insist on it in extreme circumstances where we cannot get the mortgage placed without it - premium really depends on the lender.

The premium relating to property demolition is a new one on me - I like you believe they should not lend on a property if there is a chance it is an illegal construction but then as they have financed the developer they have a vested interest - looks like they are getting you to pay for their lack of attention in financing the project in the first place. Of course if it is ordinary buildings insurance that is a legal necessity.

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I love the idea of you being obliged to take out insurance against possible demolition. This is a requirement by the bank that  providing the money to the developer to carry out the development, which bank's  and developers lawyer's and other consultants presumably  have carried out due diligence, and you yourself are represented by a lawyer again who should have  carried outdue diligence on your behalf.  Also, the probability is, if you are to check the fine print of the insurance,  it only applies to areas without a known planning problem e.g. it may not include Marbella! The cheapest insurance will be to write to the developer, Developers lawyer, bank ,bank's lawyer and your lawyer asking them  eachto confirm that the property does not have any planning problems. If they can't provide that ask them to provide the insurance! Nowadays it should be possible to check on draft PGOU's (town plans) and find that particular development you are looking at requires its planning to be 'corrected' . If it is a potential problem with the coastal law, measure 106 m in from the high tide mark and you should be OK.

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Hi Louise,

These fees do seem too high, going by the info in your post.   Normally when subrogating the developers mortgage fees and taxes are lower, e.g. there is no valuation fee, no stamp duty to pay on the loan amount, and notary and registry fees are halved. 

If you are using a lawyer then they should provide a full breakdown for you.  In essence the breakdown should consist of the following:

IVA in relation to the property purchase, Stamp Duty in relation to the property purchase, notary and registry fees in relation to the property purchase - in relation to the mortgage;  the set up fee you mention at 0.75%.  Also you may find that the lender will change a management/gestoria fee.  Also, if applicable any compulsory buildings insurance and of course the lawyer fee.

The life assurance amount is questionably high and the property protection insurance is not something I have come accross before.  You do not mention what rate you getting but there are certainly competative rate products around that do not carry these insurances!     

Please make sure this is the right thing for you to do - this is very important because if you are thinking to change your mortgage in a years time I really would not recommend it as the fees to do this are very high, at approx 5%-6%!

 

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Thank you both so much for your help.

I am finding dealing with the bank very difficult, it is like banging your head against a wall talking to them!

They had said the developers mortgage was eurobaor+0.75 % which is why I decided to go with it, as all the other terms seem ok, But 2 months dow the line they mention in passing that the rate will be eurobor + 1.50% for the term of the mortgage!  I contacted them and enquired if it had simply been a typing error- but guess what-they didnt know!

Are they allowed to change the terms of the developers mortgage. I thought that was the whole point- they cant!

any info appreciated, and thanks again in anticipation of your help
louise

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Hi Louise,
Yes they can and they do!! Many, many lenders have changed their lending criteria, making their products less attractive. You do not say how far down the line you are in the process but it is not unheard of for the developers bank to hold out on specific info until it too late to change your mind.   Again I would ask are you not using a lawyer for your purchase?  I would also reiterate, make sure this is the right thing for you.   Reading your posts I cannot see what is attractive with the developers mortgage, yes there are upfront saving but with all the figures you have mentioned in your previous post , I cannot see you would be saving much and stuck with a high rate product into the bargain - then if you are looking to change lender in a year you have all the re mortgaging costs too!!


   

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Ditto - what more can I say Sharon has said it succinctly. So often developer deals are not transparent and we so often find that clients phone us a year or so into a developers deal wanting to remortgage assuming it is the same as the UK only to discover that remortgage here is a)more restrictive and complicated and b) hugely expensive. The term "we wish we had researched it a little more thoroughly before completion" is an all too common turn of phrase. We always advise off planners to consider the developers deal but consider the long term as well as the near end and make sure that what you are getting suits you for the life of the loan (that is almost impossible i know as crystal balls dont exist but try and project forward as much as you can).

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Hi all,

I am a little confused by some of the jargon and am looking for some help here. I'm considering the developers mortgage. What is the requirement with IVA and stamp duty (or are they one and the same thing?) I've been told I have to pay 7% IVA on the whole price. I've already paid it on the 30% deposit I paid. Do I now have to pay it on the whole of the outstanding balance or just just the difference between the outstanding balance and the amount of developers mortgage?

Thanks, in anticipation

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Hi Spondonites,

The IVA and stamp duty are separate amounts.  When purchasing a property you have 7% IVA to pay on the purchase price; when buying from a developer and paying installment (deposits) for each percentage paid you will also pay the 7% on that amount. Overall, if you are paying a 30% deposit (for example) then you will also pay 30% of the 7% IVA. When it comes to final payment you will have the remaining 70% of both the pruchase price and the IVA.    Your purchase contract should clearly reflect this.  You will also have to pay stamp duty on the purchase price at 1% - but if you are subrogating the developers mortgage then you will not have to pay stamp duty on the mortgage.  If, however you source an independent mortgage then you will have to pay stamp duty on the mortgage amount, as well as the IVA and the property purchase stamp duty.

Hope above clarifies,

   

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