Benefits of buying in cash ?

Hi all

My partner and I are buying an off plan apartment with Polaris World and are heading towards completion

We had taken steps to arrange a Spanish Mortgage through a UK bank and had received an Agreement In Principle 5 months ago. Given the current market conditions, when we have reached the point of firming up the offer, their criteria has now changed (unbelievably they are not in the market for advances less than €100k and are no longer able to help us) 

Back to square one, our revised plan is now to release some equity from our UK property and I have just agreed an additional advance through my existing mortgage company which will be enough to cover completion.  

Can anyone enlighten me as to the pros and cons of this ?

- All our borrowing will be in sterling. We only have an income stream in Sterling and can agree an attractive fixed rate so I see this as removing exchange rate risk (other than ongoing costs)
- I appreciate that the £/€ rate at time of completion will mean we are paying 20%+ more than we would have 12-18 months ago although we have already funded the stage payments at the worst possible time so have learnt to live with it
- Our Spanish property will be unencumbered - what costs are we likely to save by doing this when we come to complete ?
- What happens to the deeds to the Spanish property - would you still lodge these with a bank or solicitor in Spain ?
- Any other considerations ?

Many thanks

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Sorry, can't advise on mortgages (where is Smiley these days, anyway?) but as for buying in cash and what happens with the deeds, well, you just collect them from the Notary and basically do whatever you like with them! Although it's probably preferable not to lose them, they're not as vital as you think, since you can always obtain a simplified version of the important details from the land registry (for a small fee) in the event that you wish to sell later. After signing, the notary will usually provide a simplified copy of the deed there and then (the original you can collect a few weeks later), which is good for all purposes that you may need it for - obtaining utility contracts, proof of address etc.

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I presume that if you purchase with cash then you save approximately half of the Notary fees as alot of the fees seem associated with registering the mortgage on the deeds.

Anyone know anymore on this?

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Aren't there inheritance tax implications on this financial route? i.e. you would become liable for IHT on the whole amount, since you won't have a Spanish mortgage to offset against the IHT tax.
Re the savings I was told some time back that it might make a difference of 5% (i.e. your costs would be 10% on the purchase price without a mortgage but that you should make allowance for up to 15% on the purchase price with a mortgage.) Don't know if this is still relevant however.

Just picked this up which might explain a little re the IHT.....http://www.eyeonspain.com/spain-magazine/spanish-inheritance-tax-law.aspx

Also picked this up but don't know how up to date it is (sorry)

What are the costs of raising a Mortgage in Spain?

If you are planning to complete your purchase using mortgage funding, in addition to the costs of servicing the borrowing you’ll need to budget for the following additional costs:

• Bank Valuation Fee - Calculated as a percentage of the valuation for smaller properties usually in the region of €400 to €750 plus local VAT or “IVA”. Rising to 1% of the valuation for larger properties.
• Bank Arrangement Fee – Often 1% of the mortgage loan amount.
• Stamp Duty – Based on mortgage liability and usually around 1.8% of the loan.
• Notary Public Fees – The mortgage needs to be signed and witnessed in front of a Notary in order to be effective. Notary’s fees for this role are calculated as a percentage of the mortgage liability.
• Property Registration fees - Land Registry – The mortgage needs to be recorded as a charge against the property and fees will be due based on a percentage of the mortgage liability.
• Legal fees – which may be between .75% and 1.5% of the mortgage loan amount. These fees may sometimes be substantially reduced or waived where the lawyer is handling the completion of the off plan purchase.

This message was last edited by ads on 9/27/2008.

This message was last edited by ads on 9/27/2008.

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