It is also getting easier to get finance for qualified house buyers in Spain.
Spanish Solutions work with a few terrific local Spanish banks to help to get mortgages in place for people looking to buy a property in Spain.
We always, well almost always, recommend our clients to have their finances in place before they buy. The last thing we want to do is to see our property buyers lose a deposit paid over to an agent because they were later unable to get the finance. It’s the worst case scenario for everyone- very often the buyer is so put off they never achieve their dream of buying a property in the sun and of course the agent never gets the commission they “should” for the sale, that never went ahead.
In June 2019, a new mortgage law came into force in Spain. Like so many new laws now, (due to the fact the Spanish government is in turmoil) this new law is generating a lot of uncertainty for opur Spanish real estate agents and their clients.
In a nutshell, Article 20, allows non Spanish residents who apply for a mortgage to do so in their local currency at any time. Notaries and observers warn that it could reduce the number of mortgages that are granted rather than increase them. The new Real Estate Credit Act (Ley de Crédito Inmobiliario) means any future mortgages which are taken out by expats from countries outside the euro area, (we assume its aimed to give confidence to Britons) change their mortgage into another currency.
They can make payments in Sterling in two specific scenarios:
If the clients moves to another country and the country where the person moved to work is not the euro. For instance, if you relocate to the UK, you can ask to repay the fees in GBP.
If the borrower receives “most of their income” in a currency which is not the Euro, or the mortgage owner has the most of their assets valued in another currency as indicated to the bank at the time of application of the loan contract.
Theoretically, this new law means the client has the right to request the mortgage be converted to their local currency at any time. This involves a risk with the exchange rate, especially with Sterling so volatile and this is not clearly explained. Nor is provided the pricing of the products of banks operating in Spain; I mean they can charge what they like for the privilege hoping that the intelligent market theory will keep prices in check.
Article 20 also introduces another new feature for those looking to have a mortgage in Spain. If the bank fails to agree with the customer’s request to pay in sterling, the loan will be automatically converted to sterling anyway, and backdated too.
Our local bank managers here in La Zenia and Cabo Roig are not worried and they are in fact waiting for the Bank of Spain to clarify properly what this new article consists of.
Its true that the wording is very confusing. Really, will there be many requests from foreigners asking to change the currency of their mortgage? We usually encourage investors who buy property in Spain to borrow their money in Spain, and the rental return can offset the replyments. If they get their mortgage in the UK and their is a huge shift in the value of the pound, they can lose out with higher repayments.
The Asociación Hipotecaria Española or AHE ( a mortgage watchdog here in Spain) highlights the lack of information surrounding Article 20. Their main issue is that it says nothing about the interest rate at which the conversion is made. We don’t know the price and new conditions of the mortgage. It should not be taken for granted, they tell us, that the terms will be as good.
More and more expats are buying houses in Spain amd using the Spanish banks to finance their investment. The numbers of loans to expats by Spanish institutions have more than doubled since 2013 from 10,000 to 23,000 mortgages last year.
The relative numbers are not huge- In 2018, 6.5% of the total loans granted in Spain to buy property here went to expats and 93.5% to local resident Spaniards. This figure of just over 23 thousand new mortgages which were signed for foreigners is more than ever before(even boom time Spain).
British buyers, are the second biggest customers for Spanish mortgages (after Romania!) with 8.50%. Not surprising because Brexit is increasing the numbers of buyers in Spain- up to 15.54% of home purchases by expats in Spain were Britiash people last year. In third arrive the Chinese buyers who account for 4% of home purchases by expats and almost 8% of the mortgages applied for.
The Italians with 5.5% of mortgages mirrors the 5.5% of expat house purchases in Spain. The increasing numbers of buyers from France, (more than 7% of all ex pat purchases in spain), has a modest 5% of expat mortgages.
By Autonomous region of Spain, the highest numbers of expatriate mortgages are: (2018 figures approximately)
Catalonia (21%),
Valencia (20%), including not just Valencia city but also Torrevieja, Gran Alicant, San Miguel, Villamartin, Alicante, Denia, Javea, etc.
Andalusia (17%) and
Madrid (14.5%).
Spanish Solutions have a terrific relationship with Bank Inter, Sabadell and Bankia here on the Costa Blanca.
If you are thinking of buying a property in Spain and you need finance, Spanish Solutions are here to help!
Ian Comaskey
2 Comments
Phil taylor
We are looking to buy in Spain and are residential here.
We are interested in speaking to someone about mortgage and anything else we may need to know.
If someone could get back me please.