The vast majority of clients for Valencia Property that we see buy their property without a mortgage as often they have sold their property in their home country or another property in Spain and they are moving permanently to Valencia. However, there are times when we get asked about mortgage provision and we always point people in the direction of Mortgage Direct, a local Valencian company specialising in Spanish mortgages who have access to details of all current mortgage offers through Spanish and foreign banks.
We have known Katherine and Kevin who run the company since helping them with a purchase of Valencia Property over a decade ago and they have built a great network of contacts in banks and financial services over the years along with a superb team of advisors to help you with getting a mortgage on your Valencia Property. They continue to give great service and advice to all of our clients wanting or needing a mortgage. Katherine has agreed to write an article for us on these pages giving you the latest news on mortgages in Valencia and Spain. Take it away Katherine.
“Since setting up as an independent mortgage brokerage in Valencia in 2006, we have seen a tremendous change in mortgage borrowing. Before the crisis, clients were able to take out self-certification mortgages (where the client didn’t have to show official proof of earnings) with up to 60% borrowing. As long as they could prove via bank statements or other means that they could afford a mortgage, the finance was granted.
When the problem years arrived and clients began to default on their mortgage payments and the banks’ toxic debt of repossessed properties built up, it was these products that were withdrawn from the market first. Other banks soon followed and withdrew entirely from the non-resident market, including well known lenders such as Barclays, Lloyds, Leeds Building Society, and Spanish banks like UCI who previously had always been keen to lend to foreigners.
Today, as Valencia sees a huge surge in property buyers from around the world, the banks are lending again. There are more lenders in the market, offering attractive interest rates and mortgage conditions e.g. fixed rate mortgages for 20 years from 2% and variable rates from Euribor + 1.35%, and products without life cover. The maximum borrowing amounts are similar to the pre-crisis years; 70% for non-residents and 80% for fiscal residents. This is based on the lower of valuation or purchase price. Additionally, around 15-17% of the purchase price should be allowed to cover fees, taxes and mortgage set up costs.
To check affordability, banks lending in Spain use a debt-to-income (DTI) ratio of around one third of your monthly income (after tax) to cover monthly debts, significant expenses and the new Spanish mortgage payment. Terms are typically maximum 25 years, up to age 75.
While getting a mortgage in Spain is more feasible than people think, some find the process complex and time consuming. Each bank has its own lending criteria, and mortgage conditions vary depending on the borrower’s profile. It is advisable to appoint a broker to ensure that buyers of all nationalities have access to the best mortgage conditions, and are guided through the whole process (which usually takes about 6-8 weeks).
The broker will be totally independent (working with banks inside and outside of Spain) and will liaise with the lawyers, arrange the valuation and deal with the bank’s general enquiries.
With prices still very low and mortgage borrowing so cheap, now couldn’t be a better time to invest in this beautiful city of Valencia.”
You can contact Mortgage Direct at this link to get advice on your particular requirements.
Now there are some issues to consider when looking for a mortgage to buy property in Valencia or Spain that are worth bearing in mind.
- Mortgages are not worth getting in our opinion for under 50000 Euros as the fixed costs, (Notary, Registry, Gestor, Mortgage arrangement fees and Taxes) quickly add up.
- It is cheaper to release equity on a current home if possible rather than get a new mortgage (Mortgage Direct can also advise on this if you have a home that you would like to release equity on)
- Banks may require you to have all of your utility bills, insurance etc… going through your account related to your mortgage in order to benefit from the lowest interest rates. This is usually beneficial and can reduce your mortgage payment considerably but it is worth working out by how much your monthly payments reduce before committing to these incentives.
However you buy in Valencia it is worth checking out the possibility of a mortgage through Mortgage Direct if required as they will take away the pain of having to deal with the banks, they are clear on the paperwork you will be required to present and their service is efficient, friendly and aims to get you the best deal on your Valencia Property purchase.