Frequently Asked Questions
Why do I need to pre qualify for finance?
You would not go into a supermarket without knowing you have the money to pay for what you purchase!
Buying a property in Spain or anywhere for that matter should start with a well thought through plan. Where you want to buy, what you want to buy etc. should be secondary considerations if you need finance to achieve your purchase objective!
Whether your property is required for lifestyle or investment, if you need a mortgage then you should start your search here; not at a property exhibition or by enquiring on the internet to property portals and agents.
To avoid disappointment, let’s say you find a property, you will need to know you can get sufficient finance on it. Sellers will not be prepared to take off market if no agreement in principle etc. You will spend money on flights, accommodation etc. possibly spend days looking at property which you may not be able to buy! If you are in competition for a bargain property with other potential buyer, if you are ready then you can move quicker and get the deal!
A good buyer is one who does the sums in advance of property searches, this puts you ahead of the game and agents, sellers and lawyers are more responsive. ( Be ready to Buy!)
Do I have to pay buying fees?
Yes all Spanish property will incur either a transfer tax presently 10% or 8% in Murcia, or IVA Spanish VAT which is 10% In addition notary fees, legal fees, title registration, mortgage set up fee are applicable. As a rule of thumb expect this to collectively amount to 14-15% of the declared purchase price. It is possible to purchase via SPV (special purpose vehicle) company. This should be discussed with lawyer/tax advisor as each case should be considered to ascertain objectives and benefits.
How much can I can borrow?
Most lenders will only lend up to 70% of the purchase price or valuation whichever is the lower figure where the applicant is non Spanish resident. We are able to on occasion provide 80% or even up to 100% where the property has existing debt which the bank are prepared to assign.
Typically banks like to lend 60% to avoid risk later. Where the property valuation is good however and the client status for credit excels the norm we are able to provide 85% or 90%. Basically when you apply we are then able to ascertain the level of finance reasonably expected.
How long before I receive confirmation of mortgage?
Initially as widely displayed on our website we guarantee to offer “Agreement in Principle” or AIP in 48 working hours. This of course from the time we confirm that we have your application form completed and the support documentation required to fast track to Madrid for immediate processing. One of the national state owned banks have granted Spanish Mortgage Solutions written guarantees of the AIP response times.
The actual mortgage approval proper can vary from bank to bank. Normally we say to allow between 4 to 6 weeks for the offer but some more difficult cases needing extensive risk assessment may take 8 weeks or even longer to complete. Summer time especially August are excluded as banks operate skeleton staff and admin offices close. August should be avoided on all formal matters.
How much can I borrow?
What you can borrow will depend on your ability to pay and your credit status. On average between 30% and 40% of your net monthly income after deductions. If you have other mortgages, rental expenses and credit cards these will need to be accounted for along with any other ongoing financial commitments.
Do redemption penalties apply?
Normally there is a redemption penalty of 0.5% of the if paying off within the first 5 years. After year 5 for remainder of term a reduced redemption fee of circa 0.25% is required. This matter can be considered at time of application and on occasion removed as a clause.
Do I need to use a lawyer?
You are advised to use an independent lawyer. They will ensure that all the necessary checks are carried out on the property and on completion register title including the mortgage deed. Sellers and/or their legal representatives will normally only deal with a professional for conveyance.
What is the typical interest rate on loan?
Variable rates normally apply and based on the annual Euribor plus an additional percentage.
Rates can be discussed on application as can be tailored to suit in many cases.
Have you got a question we have not covered?
The above points are of course only a few of the many we receive. If you have a question contact us for a quick and informative response.