Welcome to our end-of-year newsletter. We are pleased to confirm that while enquiries dropped slightly in recent months, last month they were still 27% higher than this time last year, which is encouraging given the ongoing pandemic. Similar findings have been quoted by a reputable property portal we work with.
Unlike the Global Financial Crisis from 2008 to 2014, where there never seemed to be an end in sight, this pandemic does seem to have one with the vaccines that have been announced since early November. We expect to see a surge in interest from clients wanting to buy in Spain when the current travel restrictions are lifted, similar to the bounce we saw through the summer months before the second wave of the virus hit.
How to use your home to purchase another property
– fiscal residents only
For Spanish fiscal residents, paying their income taxes in Spain, it may now be possible to finance 100% of the purchase of a second Spanish property against both their current Spanish property and the new property – known as a Doble Garantía Hipotecaria.
For example, a client who is a fiscal resident in Spain owns a property valued at €300,000 and is mortgage-free wanting to buy another property for €500,000 but has little cash savings. The total value of both properties is €800,000.
An employed person can, in principle, borrow the lower of 80% of the combined property value (€640,000) or 100% of the new property value. In this scenario, the maximum loan would be €500,000 and both properties will be used as a guarantee.
Self-employed clients can usually only borrow up to 60% of the combined property value so in this case the maximum loan would be €480,000 and there would be a €20,000 shortfall in the price.
The main conditions are that the new property is used as the main residence and the minimum price is €150,000. Clients must also pay for the fees and taxes (amount varies according to region and other factors) from their own cash funds and rustic land properties may be more difficult to approve.
If a client already has a mortgage on their existing property, they may be able to re-mortgage and raise the finance subject to passing the bank’s affordability criteria and the loan-to-value (LTV) being suitable.
We have been told it may now be possible for non-residents if the minimum borrowing is around €300-400,000.
For more help with your mortgage please go to https://www.thorntonsteeden.co.uk/mortgage-in-spain-calculator