Mortage Guide Advice
WHY USE A MORTGAGE INTERMEDIARY/BROKER?
If you require a mortgage in Spain it is important to use a licensed mortgage intermediary to source the right mortgage product for you, ensure the terms are fully explained and manage the mortgage process efficiently
If your mortgage intermediary is not registered and licensed by the Bank of Spain they cannot be active in the mortgage industry
By using an established mortgage intermediary you shall have access to all available competitive mortgage products and, most often, preferential terms, as well having your interests protected. Banks also prioritise applications from reputed brokers.
When approaching a bank directly the best possible terms may not be offered as bank managers are instructed to maximise the profit of each application and this can result in higher interest rates.
Even if you have not located a property yet it is best to contact a mortgage intermediary to determine if you are eligible for lending. You can obtain a financial approval before travelling to Spain to view properties, therefore your budget is defined and the lending process is underway. This shall strengthen your position when negotiating with the vendors of the property you wish to purchase as it evidences both your seriousness and removes any uncertainty as to the mortgage viability, you can proceed straight to valuation upon finding a suitable property.
Our recommended mortgage broker has no upfront fees, a fee is only due if a financial approval is obtained from a bank underwriting department at the moment you decide to instruct the valuation on the property you wish to purchase.
WHAT MORTGAGE PRODUCTS ARE AVAILABLE?
At present only repayment mortgages are available as following the market crash in 2008 the Bank of Spain informed banks that interest only products should be withdrawn from their portfolios.
The maximum percentage of finance that can be raised as a non resident is 70% of the lower of the purchase price or valuation, this is possible for properties registered as urban.
The classification of the property you wish to purchase is important. If the property is classified as rustic (not as urban), as may be to be the case with properties in the countryside, the mortgage options are limited. Only a maximum of 50% of the lower of the purchase price or valuation shall be possible. The maximum term for a mortgage shall be between 20 to 30 years up to age 75.
The maximum percentage of finance and maximum term and age vary according to the bank.
Product types:
There is a set rate for the first year and the remaining years of the mortgage track the yearly Euribor to which a margin is added (the rates are reviewed every 6 or 12 months after the first year, depending on the bank).
By fixing the rate of your mortgage you are protecting yourself against interest rate fluctuations. The redemption fees shall be higher than with a variable rate mortgage product.
There is a set rate for the first year and the remaining years of the mortgage track the yearly Euribor to which a margin is added (the rates are reviewed every 6 or 12 months after the first year, depending on the bank).
These products allow you to fix the rate of your mortgage during the initial years, the mortgage shall then convert to a variable rate.
An important point to be considered is the currency of income as the law permits the mortgage to be changed to the currency of income at a later date. As a result, fixed rate options are limited for non-euro earners, and only certain currencies are accepted.
HOW DOES THE MORTGAGE PROCESS WORK?
Having gathered the necessary documentation for your application your file can be packaged and submitted to the bank.
Once submitted, a lender shall provide initial feedback in approximately three days, there may be questions to answer. Once answered the file shall be sent to the bank´s underwriting department for an answer to be issued within 3 to 5 days. Turnaround times shall be affected by work volume at the bank and the time of the year (during holiday periods delays occur)
Once the financial approval is in place the current account can be opened for the valuation fee to be transferred and the valuation can be instructed. A current account must be opened with the bank that is granting the mortgage. The balance of funds for completion must be sent to this account also, it is also the account from which the mortgage payments shall be taken.
From the moment the valuer visits the property the report shall take approximately 5 days to be sent to the bank. Once reviewed and confirmed as satisfactory, the mortgage offer documentation shall be released. The valuation report can also be requested independently, the banks must accept a valuation report from a Bank of Spain registered valuation company carried out for mortgage lending purposes.
When considering the timescale for completion it´s important to consider that the signed mortgage offer documentation must be at the notary of your choice a minimum of 10 days before completion. Within this timeframe an initial visit takes place to the notary (in person or via power of attorney) for the notary to confirm your understanding of the mortgage terms.
In Spain the banks act as the collectors of expenses and pay the purchase deed taxes and costs on your behalf. Once the mortgage is under offer the bank shall liaise with your lawyer and release the provision of funds, this is the estimated breakdown of costs of the transaction. Once the deeds have been registered at the land registry any surplus funds are credited to your account.
We will introduce you to our Mortgage Expert that will help you with the mortgage of the property you would like to purchase.
For more information, please contact us at: [email protected]