Living under a blue sky

A small mortgage a big difference!

Even though the property market has seen significant price corrections over the past few years, they have tended to level out and hold some ground at least for the desirable ones!

It’s always a good idea to view a range of property at slightly higher prices than your budget will allow. This will help you to establish a true value, plus you never know how much you may be able to negotiate.

Even after negotiations and price reductions, we get many buyers that still need the extra 50,000 Euros!
It’s amazing what difference some additional funding can make, especially on properties under say 400,000 Euros

Buyer and seller expectations are still widely apart and even though sellers may have reduced their prices significantly, most are still willing to take a fair offer. However, there does come a point where one cannot go. Usually this is when a purchaser may see something fantastic but way beyond their budget and regardless tries their luck!

In most cases they do manage to get a substantial reduction but inevitably fall short. This is where a Spanish mortgage for a small amount could help you buy something very special. It could be a short term solution rather than take second best. You just need to be able to service the debt until you can pay it off in full should you wish to.

Cash buyers are always around and ready to secure a deal unlike anyone needing or considering some extra finance. It may well be worth your while to investigate the cost of some additional funding as it may help you fulfil a dream or acquire a property that will be a much better investment, especially if it attracts a considerable rental income.

Should this be the case, it’s better to know exactly how much you can get and at what cost as well as go through the banks means testing process before looking at properties. This means you are well prepared and ready to strike a deal. If you are unprepared and happen to find something special, chances are another cash buyer will pip you to the post by the time you get mortgage approval!

To help prepare anyone seeking a Spanish mortgage here is a simple outline of what a bank will require.
Take note that some of the figures and examples given will change but were correct at the time of writing 1st Feb 2012.

It’s also worth noting that many banks now require a physical appointment with you before you can open an account with them. It never used to be like this. However some do have banks in the UK which would suffice.

What will a bank require from you?

(Assuming you are working for someone else)

A copy of your employment contract
Three recent Wage slips.
The bank will also look at the strength of the company you work for.
Last P60 Tax return
Recent bank statement
Experian or Equifax credit report
If you have an existing mortgage they will want a copy of your payment history.
If you intend to obtain a mortgage in joint names both parties will need to supply all this information independently.
Passport copy
NIE number- you need to obtain this before purchasing a property in Spain. It’s used to pay taxes against. This can take a few weeks so it’s prudent to get one in advance.
Asset list. You need to write down a list of main assets like properties, investments and shares.

(Assuming you are self employed)

Same as above plus 2 years accounts

(Assuming you are a director of a limited company)

As above plus

Company details and registration number . Date of incorporation/ copy of certificate.
Your directorship/position and shareholding/ equity in the company. Last full set of audited accounts.
Company loans and a list of the board of directors.

For a bank to consider extending a mortgage to you, your debt to earnings ratio should be no more than 33% including your new mortgage! Credit cards are only taken into account should the debt on them be very excessive.

Usually mortgages can be extended as follows:

Non resident in Spain: Mortgage period up to 30 years but maximum age 75 and can lend up to 70% based on the minimum amount i.e. Valuation or purchase price.

You can pay off the mortgage at any time, partially or fully but you will be liable to a cancellation fee of 0.5% for the first 5 years. After that the rate drops to 0.25%.
This is governed by law and not a bank rule!

Most banks avoid interest only mortgages, so this is difficult to obtain and usually short term.

The mortgage can be for a resale property or for a new build project with a plot of land. In this case funds are given out over a period of time subject to the progress of construction.

Most banks require that you have your life insurance with them.
For the first year you must also use them for your buildings insurance. After which you are free to obtain alternative quotes but not for your life insurance as that is normally an integral part of your mortgage.

If resident in Spain you can get up to 80% mortgage for your main home, up to the age of 75, for a maximum period of 40 years. If it’s a second home this changes to a maximum 70% mortgage.

Mortgage cost (figures will vary)
A Spanish mortgage can have a fixed interest rate for its life, currently 6.1%
Variable rates are reviewed annually. Currently 1st year 4.25% then Euribor plus 2.2%
Euribor current rate is 2%. There is a minimum and a maximum on the rates to be applied. Currently 4,25% – 12%. This means that the interest rate will never be less than 4,25% (as first year) or more than 12%.
For example, if on rate review, Euribor is 1% , + 2,20 = 3,20%, regardless, the rate applied will be 4,25% as a minimum.

Initial set up fees are typically 1-2% of the amount loaned to you.

There is also a mortgage tax called ADJ and is 1.7% so you need to allow for this on the typical 10% purchase cost. Plus there will be extra notary and land registry fees for the new mortgage deed. However, if you take over an existing mortgage you can avoid the ADJ tax. See below.

Based on the above, lets say you are a non resident and wanted an extra 80,000 over 15 years.

A fixed rate of interest of 6.1% would mean your monthly payments including life insurance would be 710 euros.

If it was a variable interest rate the monthly payments for the first year would be 628.90 at 4.25%

To check the Euribor rate you can find it Here

Another option is to take over any existing mortgage on the property. Bearing in mind you will inherit the previously agreed mortgage terms, so worth studying to ensure you are happy with them.
Taking over a mortgage is called “subrogacion” doing this means you will avoid the set up tax of the mortgage deed known as ADJ (Actos Documentados Juridicos) also known as stamp duty. Banks will also negotiate or remove any set up fees if you ask them nicely!
All other purchase cost are the same and typically amount to 10%

You can also use our mortgage calculator. Just scroll down to the middle of the page and you will find it Here

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Moraira & Javea property news Nov 2011

It’s been 8 months since our last Moraira and Javea property news update. Time fly’s!

This year started very well as we reported previously. Thankfully many more clients have decided to use our services and we have continued to be very busy.
Many of the leading estate agents have also reported having a very busy year. Regardless of the dire economics we all face, there has been a glut of buyers ready with their cash.

The biggest problem has been and continues to be the significant reduction in the average property budget that buyers now have in relation to the bulk of property prices out there.

Consequently the availability of quality property stock that falls into the price band that people can afford has diminished and the amount of legwork involved with finding an affordable property has increased substantially for all concerned. You have to kiss a lot of frogs!

Over 93% of enquiries are for less than 400,000 euros and 70% of these are for less than 300,000 euros.
Having spoken to many agents they have confirmed a similar enquiry pattern.

For the majority of properties for sale, agents are struggling to close the reality gap between vendor and purchaser expectations.

Quality properties that do fall into the mainstream affordability band and represent value for today’s money have continued to sell throughout the year and expect next year to follow the same trend.

We have had a very busy year doing just that for our many clients and this is where a property finding expert can help you find quality property quickly and help you decipher the best from the rest in a short space of time.

Happy hunting!

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Moraira Property Update Feb 2011

The end of February 2011 is drawing in and before writing another news blog again, we thought we would see what kind of start to the New Year we, and many others, would have as far as the Moraira property market is concerned.

Looking back and having had a very difficult 2009, at the beginning of 2010 we thought the year ahead would be nothing short of a disaster. However, what we did not appreciate was the knock on effect of low bank interest rates and how this would change the mind set of savers.
Throughout 2010 and to our surprise we experienced a glut of cash buyers that seemed to come from nowhere, but they all had one thing in common, they were all removing savings from there banks and wanted to purchase property in Spain to enjoy the dream, which in essence boils right down to a fabulous climate.

Some liked the idea of their asset being income bearing if required and many hoped their investment had a good chance of future capital growth, but most did not really care as it is something to be enjoyed today by all, knowing full well that long term the property/asset will have good upside potential, which is more than one can say about having too much cash lying around. The fact is, most of us seem to be getting less value for cash/money each day.

Consequently, 2010 has turned out to be one of our best years to date and we have had many satisfied customers as a result of our property finding services! We work hard for our clients and manged to find many fantastic properties offering exceptional value for money, whilst avoiding the “lemons”, if you are familiar with this phrase used for poor second hand cars!

Having spoken to many leading estate agents in Moraira, they have all reported increased sales throughout last year, however enquiry levels for most, including ourselves, tended to drop slightly from November to the end of January but this can be put down to the seasonal changes. The good news is that it has gone ballistic again and with so much bad news about it takes a lot of understanding as to why property continues to sell, so we try to make some sense of it all rather than just talk it up for the sake of it.

Regardless of all the doom and gloom we hear on the news, we still have a grab your savings and go long on property mind set/trend, well for Moraira and Javea at least.
Already this year has set new records for us and many others in terms of actual sales not just enquiry levels.

Obviously there are many bargains around, it’s the sign of the times but if there are bargains to be had, we find them as we work with every estate agent in the area and beyond, including those off the beaten track, which surprisingly can have some very tasty properties from time to time!

You still need to be careful though if you want to find a genuine bargain. Many so called bargains can be fundamentally flawed and in most cases have been reduced time and time again. So please be extra careful that you do not make the wrong compromises. You may one day regret what you inherited.

As sure as eggs are eggs, fundamental compromises will rear their head again in the future, especially when you come to sell your property. We help our clients make the right decisions based upon the comprehensive feedback we glean from the expectations of previous clients, that in essence dictate what sells and fundamentally what doesn’t.
We are well placed to advise and drill down every aspect with you, so being open with us is the only worth while policy to have.
Consequently, we have many satisfied customers whom have decided to use our dedicated property finding services, thus saving time, money and in the process buying a property well worth while and one that will always be highly desirable in the future.

There have also been many properties sold in Javea during 2010 and many have reported a busy start to 2011, so it would seem the pattern is similar.
In particular the Dutch have been very busy snapping up many property bargains all over.
We have also seen a significant increase in British clients and we think the trend will continue throughout 2011 from the number of enquiries we are getting from the UK.

We obviously speak to many clients and it would seem the worse it gets in the UK the more disillusioned and unsatisfied the people become and for those lucky enough to afford and enjoy another lifestyle, that’s exactly what they are doing because they realise life is too short and do not wish to wait for the promise of better government, honest banks or sound economics. It’s just not going to happen, well for many years to come at least. This is one of the main reasons why property has been and will continue to be sold, providing it is in a highly desirable location, like Moraira and Javea.

So glad we chose Moraira as a place to live! We are some of the lucky ones but we made it happen.

Until next time happy property hunting.

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Moraira Property Update

It’s been a while since we wrote about the Moraira property scene as we wanted to see and experience where it was heading.

As far as the property market goes it has picked up significantly for most if compared to the previous two years. The market seems to have stabilised albeit there are still many properties that are over priced. That said price corrections are now common place, but still the best bargains tend to be down to the personal circumstances of the vendor.

The year so far for us has been fantastic and likewise for many agents we speak to with property sales on the increase. Thanks to Moraira being a highly desirable place to be it attracts property sales as soon as things start to stabalise. There are many buyers around at the moment and hope this trend continues regardless of the UK media always talking about Spain’s deficit and painting a doom and gloom picture. The negativity probably takes the heat off the UK’s recent austerity measures.

Spain has its problems and they are of course very serious as is the UK’s but the coastal town of Moraira remains far more insulated from the wrath of the poor economic climate as a whole. In fact this summer has seen some of the largest crowds at the local fiestas ever and villa rentals are almost full.

The market here in Moraira is driven by Northern Europeans more so than the nationals or Spanish economics, although it’s bound to have some bearing on things especially when taxes or rates increase. Regardless of increasing living cost here in Spain, northern Europeans still want sunshine and a little paradise for their families. The irony is that people are now getting used to the economic problems and know they will not be going away for some time but meantime they still have a life to get on with regardless and now seems to be a good time to invest in property rather than leave cash in the bank which is also a concern for many.

The threat of turmoil was worse than actually being in it as we are today.
The problem with a threat is that you don’t really know how bad is it going to be, so people fear the worse and sit tight becoming spectators for a while which makes things even worse and then they wait until it’s bottomed out. The talk of a double dip recession does not make much sense unless you believe in a so called recovery. We all know the economic struggles we have today will last for years, it’s hardly going to recover and will simply stabalise itself and remain tough. We will probably see some more bailouts, mergers and austerity measures over the next two years or so but for most it will be no surprise and life will continue and wealth will still be created and spent.

So when does it bottom out? If bank bailouts, country bailouts, hardly any interest being paid from the banks to savers, debasement of their currency through the printing of even more money, lowest interest rates in history as well as the real cost of inflation being hidden is not enough, I don’t know what is!
Its no wonder property is becoming a safe haven again.

Consequently we see so many property buyers coming from Holland, Belgium and the UK. Only this time around it is being led by people that understand value for money and investment opportunities plus they are mostly cash buyers. Very different from the boom days where the many could well afford the Spanish dream based upon their equity in their main residence and when banks fell over backwards to lend money which all added to the property price hike.

Having spoken with many clients over the months it’s obvious there has been a shift in the mind set where once people were more than willing to sit it out and leave their money in the bank or in other investments.
95% of all our clients are now cash buyers. This is because anyone with savings, especially in a bank, hardly earns any interest. They seem to be taking their money and investing it into something tangible. Most do not gamble with stocks and shares at this level and historically property has always been a good long term investment that is reasonably safe, plus it is income bearing if you go down the letting route and you get to use it with the family, so it kind of makes sense.

Spanish banks have begun to lend again but to get the best deals around you need to put down 40%. The less risk for the bank the better the deal for you!
They do lend up to 70% and sometimes a little more but the packages are not as good.
They also vet you like never before especially if you have your own business, so be prepared! We have a few contacts for mortgages if needed!

A word of advice: It’s better to get your finances in order before looking for a property because you may be refused by the bank or if not by the time you get mortgage approval the property you found to be a real bargain gets sold to someone else. Happens all the time! If it’s any good that is.

Happy property hunting and don’t forget we can take away the stress and find properties others can’t as well as make things very easy for you!

Good luck until next time

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