Spanish mortgage - Frequently asked questions (FAQ)

In Rose Financial Services, you are acknowledged as a professional mortgage broker and independent financial advisor and receive inquiries from people of all lives. And it is not surprising that the amount of inquiries see the repetition of the request.

The following guide has been created to answer many of the basic questions of Rose FS on client procurement of mortgage secured by Spanish real estate. Since it is divided into three parts, please collect everything so that you can understand the structure of the mortgage in Spain widely.

1) Are you interested? Are available mortgages?

Yes, & # 39; The interest only time & # 39; (IO) period ranges from 1 year to 25 year maturity. However, schemes that provide long term IO (10-25 years) are much more restrictive than short term (1-5 years). Because the Spanish lending market does not yet respond to the British way of thinking in this regard.

After the first IO period, the mortgage will automatically switch to repayment or capital and interest type for reminder of the mortgage period. For example, if mortgages are organized over a two-year IO period for 20 years, mortgages will switch to 18-year reminders from the third year. Although the interest rate remains unchanged and fixed annually, you are asked to start repaying capital and interest.

At this stage there are many choices, so we recommend you to review the problem of Rose FS.

i) Transfer the mortgage to the repayment type and start repaying the capital. However, this is not necessarily a good IHT plan (see question 2).

ii) Ask the bank to extend the IO period. There is no guarantee they will grant this, but market conditions may be found with your favor.

iii) Review remortgage and switch to another lender. Of course, the downside of this is the cost of doing so. Therefore, long-term requirements need to be considered when planning the details of the mortgage

2) Why a mortgage, as opposed to repayment (mortgage) exclusively for interest?

The spiritual approach to this differs from the usual region applied to borrowing in the UK. The advantages are often very different.

I) There is a sleeping giant in Spain. Of the problems most home owners are unaware of, inheritance tax (IHT). For a guide to this important problem, see question 12).

It is important that we can not justly consider real estate acquisition in Spain.

Ii) The interest rate of Spanish mortgage loans is lower than that of the UK and in most cases the capital and income used to do either interest payment or repayment arises from the income or capital base.

If so, it is beneficial to keep as much capital as possible in £ and invest for higher profit. For example, even a careful investment in a savings account can generate a 5% interest rate return at the time of writing. If the average euro mortgage rate is 3.5%, the net rate of return is at least 1.5% annually. Over the standard period of 25 years, it will total up to 37.5% of the capital employed. If the mortgage is 150,000 euros for example, this is equivalent to a huge extra income of 5,650 euros (about 40,000 pounds).

Iii) Interest expense is generally permitted for incomes received for purposes of calculating income tax. Therefore, the longer the IO period, the higher interest expense and tax savings. Please remember that income will increase due to the reduction of capital adopted as mentioned above.

Iv) Potential currency risk exists if we hold assets (real estate in Spain) against foreign income (euro) against natural income and capital base (usually the majority of customers).

Therefore, by keeping the liability (euro housing loan) as high as possible, there is an offset that can mitigate negative exchange rate fluctuations.

3) What is the normal interest rate to be paid to the Spanish euro mortgage?

The fee usually has a margin against the European Central Bank's annual rate (Euribor) or the Spanish Cajas rate and it is fixed again every year. This is useful for predicting cash flow. It is common to see the first year discount.

Here, the current first-year interest rate fluctuates from the low bidding condition and the lowest 3% of repayment mortgage. If the IO period is long, a premium is imposed by the lender, so the average rate will be from 3.3% to 3.6%.

4) What kind of materials do I need to present?

ID. Passport and

Residencia card (for residents) or

NIE (nonresident ID number). Rose FS will support the necessary NIE arrangements.

Income certification tax payment x 3 months

P 60

Pension letter

Rental income agreement

Tax evaluation (self employed)

Trading account (self employed)

Statement of accountants (self employed)

Bank account information x 3 months (All bank accounts, UK, Spain)

Statement of existing mortgage x 3 months

Remove existing Escritura

Original Compraventa (purchase contract)

Recent evaluation

Estimate of completed work or purchased real estate

Latest existing existing mortgage or loan details concatenated

Purchase Compraventa (purchase contract)

Property details

Lawyer Contact Details

Realtor details

It all sounds awful, but in most cases, many documents do not apply.

Also, Rose FS does not copy the original but only copies it. However, the original passport, NIE or Residencia will be required when the process is legally completed.

The application process can be done from a remote location via mail, fax or e-mail. You do not need to physically meet a mortgage advisor, but complete the process of determining needs on the phone.

5) How much is it to arrange a mortgage?

Placing a mortgage in Spain is somewhat more expensive than the UK and in general it is necessary to allow 5% of the mortgage amount you need as below.

1% lender fee

1% Rose FS fee (minimum EUR 1,000)

1% notary / registration

1.6% AJD mortgage tax

0.15% Evaluation fee prepayment

EUR 300 Booking Fee Front

As you can see, the only funds necessary for Rose FS to apply for mortgages are valuation and reservation fee. All other expenses will be paid upon completion and will be deducted from the new current checking mortgage with the lender.

6) What is the cost of repaying mortgages early?

Redemption penalty is relatively cheap in Spain, as it is usually called. Norm is 0.5% for partial repayment, 1% for complete repayment. However, the common approach to repaying a mortgage is never to fully redeem it, but to keep a small balance.

7) Do I need to use a professional Spanish and English speaking attorney?

Simply release the Remortgages you are exchanging lenders, or the capital / equity from your home, or this process is simply simple and does not guarantee the additional costs of the requestor.

However, in the case of purchase, it is strongly recommended to use such experts. Rose FS is pleased to recommend the company.

8) Do I need to attend the mortgage and / or legal completion of purchase?

The short answer is no, but this is always recommended.

Legal completion is performed by Notarisation & # 39; related act or Escuritar & # 39; Notary. He or she will become a government appointed executive with the authority to witness and sign the legally binding agreement.

If you can not attend a notary, or you do not want to attend, you need a lawyer & a lawyer. An agreement given to a trusted third party. Rose FS acts happily for you, but in Purchases, you request that your solo act for you. Also, in the case of purchase, it is recommended to provide a more powerful authority (such as opening and executing a bank account) rather than a standard restricted power & # 39; general power of attorney I will.

9) Do I need a Spanish bank account for housing loans?

Yes. Every bank insists on opening a checking account to sit along mortgages to receive mortgages and pay mortgages.

As part of the process towards Notisation, you need to run an account opening form. If this happens more quickly, of course, it is better.

10) Are they any mandatory or recommended insurance for mortgages?

Yes. The only mandatory protection or insurance policy required by all banks (this is the same in the UK) is building insurance. Every bank wants to see this and even insists on arranging it for themselves.

In addition, it is strongly recommended that all mortgages are protected by a) life assurance and b) income protection to ensure that mortgages and underwriting assets, your home is well protected I will.

It is not desirable to purchase real estate and you will only lose it from accidents, diseases, or obstacles outside your control!

All Rose FS clients will be interviewed by our independent financial advisor in this regard.

11) What happens if my income is low or if I can not prove my income?

This is not a rare issue, but it usually concerns lender problem and requirements.

The lender sees two risks in determining whether a mortgage application is acceptable.

i) Ability to meet you and your monthly mortgage payment.

This translates into a) the creditworthiness of the applicant (the lender performs the check) and b) a certifiable, regular income.

ii) property.

This translates into: a) the proportion you lend to the valuation they perform and b) the state, type of real estate etc.

Self-employed certificates are sometimes difficult as accountants try to maintain net income when preparing their books and therefore pay the lowest possible taxes. However, looking at recent bank statements, the latest books from accountants, a combination of tax assessment and comfort letters or statements will usually work.

If your income is still low, or because wages, pensions, rents or investment income is low, you can use a third party (usually a working child, siblings or sister) or co-applicant of a mortgage, or a guarantor . You also do not need to come to Spain to run legal documents. This can be achieved through a power of attorney from a remote location. Rose FS will arrange for this.

It is important to mention two things here.

i) If you are not maintaining mortgage repayment, as with you, the joint applicant is in danger. It needs to be carefully explained to them.

However, in many cases, the addition of a guarantor actually reduces such risks, especially as long as the long-term applicant is an elderly person, payment of the mortgage will be extended over a longer period than usual I will let you.

ii) Guarantor does not need to add to property certificate. In other words, ownership of your estate does not need to use a third party to financially support your application.

12) I am getting old for housing loans, but how long is the repayment term?

Many elderly customers believe that their age is too high to apply for mortgage despite the maximum age of repayment is 75. This is not the case.

By accessing the application using a third party or by fulfilling the role of a guarantor (as described above), the emphasis on risk loan valuation is to rely on additional third parties (usually children) It will be removed from older applications.

This often creates a plan for inheritance tax because the deceased debt reduces tax payable.

Therefore, you need to access or purchase some of the capital that is trapped in your home, you need to worry about your age and income & # 39; & # 39; If it is, you should consider this option.

13) Do you need to worry about Spanish inheritance tax?

worry! Worried, yes! Understanding the problem and exceeding it is more than half of battle!

The majority of people buying in Spain, especially in the UK, assume that the Spanish IHT region is the same as the UK. This is not just that. It is very different, a) to understand the problem and its potential impact on you and your family, b) to understand how easy it is to handle it,

The main difference between the IHT system in Spain and the UK is tripled.

i) There is no exemption from spouse at home

ii) The IHT allowance resides in the recipient (ies), not the deceased

iii) Spain's standard personal allowance is only £ 275,000 vs. 15958 euros in the UK. Great difference.

The effect of IHT means that the risk of paying IHT is high, as most people buying in Spain are nonresidents for tax purposes.

However, IHT is taxed on "net assets". As recipients' salaries have been received, keeping mortgage loans as high as possible reduces taxable exposures. Mortgage redemption decreases over time and has the opposite effect from increasing IHT exposure.

Even if the preference is repayment, it is prudent to consider the IHT as an alternative to IHT mitigation as described above and consider the period as long as possible. You can benefit from the beneficiary as collateral when property is given when the current owner dies.

There are various routes to solve the problem and IHT mitigation measures to consider and consider.

i) Maximize interest only (as above)

ii) Effect life guarantee (usually lifetime). This is usually written in trust in favor of the ultimate beneficiary, in order to ensure that taxes are not avoided, but rather that funds are available to satisfy tax deductions.

iii) Add benefits to the property certificate. Taxes are calculated according to the distribution of prohibited shares of real estate (or other assets) and classification of beneficiaries, so adding early beneficiaries to make each person have fewer shares Yes, reduce.

There are some problems, but problems caused by doing this.

i) Capital gains tax may be paid by changing owner of real estate. Timing is important.

ii) It may not be comfortable for your children to give part of your house! We said that concerns are resolved at least to some extent by taking a general power of attorney as control is on you, but as these powers can be withdrawn at any time, whatever arrangements, You need to be comfortable.

Finally, your effect is important here in Spain. This is because there is a default mechanism that will determine the fate of your property if you die alone. It may mean that people may benefit in ways you do not intend! Rose FS recommends a lawyer to assist.

I hope this FAQ series was useful. However, if you have questions of different nature, please do not hesitate to contact us.