When turning over the idea of that dream home on the Costa del Sol, there’s usually going to be one obvious next question: how are you going to pay for it?
The answer is still likely to be a simple one, even if you’re not in a position (or not inclined) to buy it outright: consider getting a mortgage!
Spain’s property market functions similarly to those in the surrounding countries, which means that you will probably have a mind-boggling array of mortgage options to choose from here in Spain. Boggled or otherwise, it’s great that there are options!
The mortgage market here in Spain is also similar to that of neighbouring countries in terms of the variety of pricing, flexibility and terms you’ll be contracted to; so it pays to ‘shop around’ and make sure that you’ve fully understood what you’re getting yourself into… not quite as simple when you’re doing it in a foreign language!
There are many banks in Spain that will be happy to offer you a mortgage directly, or you can see a mortgage broker just as you would ‘back home.’ If you aren’t interested in going to a local bank for a mortgage, you can still secure one through one of the many international banks (many of which are British). Some of these banks will offer mortgages to customers wishing to buy property in Spain – they won’t restrict you to the country you’re applying from within. You can try Barclays Bank or Lloyds TSB, for a start.
If you decide to get a mortgage from within Spain, bear in mind that Spanish mortgage lenders may decide their own fees and terms – this is not something that is particularly uniform. Interest will be calculated using the base rate of the European central bank but this does not mean that the overall costs will be similar – ‘doing the math’ is extremely important, so make sure that you have accounted for all fees involved.
Depending on how old you are, the current market dictates that you could get a Spanish mortgage for between twenty and twenty-five years. If you want to keep your monthly repayments low, you’ll want to aim for a longer-term mortgage, but bear in mind that this will essentially be more expensive over all.
Common mortgages from within Spain
Variable rate mortgages are certainly the most popular mortgages taken out here in Spain, to locals and expats alike. This gives you less control (and some might say security), but people seem to be more comfortable with it than the idea of a fixed rate mortgage in which they will always pay the same regardless of whether the interest rates fall. Knowing that you could be saving lots over extended periods but are tied into paying more can be a tough pill to swallow! It’s always a gamble, as the market can be unpredictable, so your choice will undoubtedly be down to personal priorities and financial circumstances projected over the long haul.
If you prefer the stability of a fixed rate mortgage, you’ll be in the minority for sure, but it’s still possible to acquire one from almost all mortgage lenders. You may find that your interest will be high in the beginning, but if the rates happen to rise, you could well be better off than those on variable rate mortgage plans. It’s really a question of security, stability and certainty.
If you’re struggling to decide which type of mortgage would suit you best to fund that luxury Marbella townhouse, perhaps you’ll prefer to seek out one of the lenders that can provide you with a mixed mortgage. With one of these, you might pay a fixed rate for the first few years and a variable on later. Whatever your individual needs are, with a bit of research it should be possible to find one that is more tailored to your lifestyle.
Do you meet the criteria?
The lender will undoubtedly have some terms and conditions you’ll need to adhere to in order to be offered one of their mortgages. Your earnings will be a highly-prioritised factor, as will be your other financial commitments. You will be able to borrow a multiple of your salary (or a combined salary with a spouse), provided that you do not already owe more than thirty-five percent of your total yearly income.
One bonus is that if you can show that there is a high chance that your income will increase significantly in the future, it may be possible for you to borrow more based on this projection. So that stunning beachfront Villa in Marbella may not be totally out of reach after all!
Having said that, the type of property you are looking to invest in is something that mortgage lenders will take into consideration before offering you a mortgage. For instance, you’re less likely to get the mortgage for a holiday home than one that you plan to live in full-time yourself, because they’ll assume that your mortgage on a holiday home would take second priority position than your own home’s mortgage if you were ever to encounter financial problems. However, if you meet the requirements of the lender you are still likely to be granted this kind of mortgage; it’s just that if you do secure it, it might be more expensive.
Paradise Marbella are here to help. Not only in choosing your perfect Costa del Sol property, but also with advice on the best way to fund it – and all those other burning questions you may have before you feel comfortable kicking off your Spanish lifestyle. Try us! If our other satisfied customers are anything to go by, you might just like what you hear.