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Financing Your Spanish Property
Unless you are paying for your property outright with cash, you will need to finance the purchase in one way or another. Two of the main ways in which you can do this are:
- Using the equity in your residential property, or existing buy to let portfolio, by means of a remortgage, assuming that there is sufficient equity.
- Taking out a new mortgage on the property that you are buying in Spain.
If you opt for a new mortgage, you will probably only be able to get a mortgage for 60 - 70% of the property value, so the monies for the deposit will have to be found from alternetive sources. If you do not have sufficient available cash to do this, you could then use the equity in your home in the UK to release the funds needed for the deposit. Again this could be done by means of a remortgage or secured loan, which are the cheapest options available. There are only a couple of Lenders in the UK that offer mortgages on Spanish properties, and the interest rates are not particularly attractive. However, the low interest rates in Europe make a mortgage from a Spanish Bank a very attractive proposition.
However, depending upon the Mortgage Lender that you use, the property value that they base the 60 - 70% on may well be the new value upon completion, and not the value when you purchased the property. That being the case, if the property value has risen enough during the build period, you may be able to recoup your original deposit monies from the new mortgage.
Who Can Have A Mortgage Abroad?
Most people can have a mortgage abroad providing they have an income, whether this is earned, investment or pension. The main restriction tends to be age, where the maximum age for mortgage purposes tends to be 70 years old at the end of the term. However, the maximum age is applied to the youngest name on the mortgage.
Consequently, if you are an older client who is retiring but still needs a mortgage, then multi-generation mortgages are allowed, and thus a younger signatory on the mortgage will allow a longer term and lower monthly repayments.
For example: If Mother & Father are 65, the maximum term allowed for the mortgage would be 5 years. However, if they included their Son or Daughter aged 40, the maximum term of 25 years would be allowed, thereby ensuring affordability.
You can have a mortgage on your Spanish property even if you have an existing mortgage on your property in the UK. Your foreign mortgage will be based on affordability on your income from all sources, after tax, on a monthly basis. From this income, your existing mortgage repayment (or rent) plus any monthly repayments for any loans or finance agreements with more than 12 months to run (not credit cards) are deducted. The net figure is then multiplied by 35% and this is deemed to be your affordability for your new mortgage.
Click on this link for information on mortgages & home loans online. Here you can get online information on remortgage rates and click here for quotes for loans.
