Mortgages in Spain for off plan purchases

Buying off plan and raising finance

As the Spanish property market has recovered more and more buyers are looking at off plan purchases which can provide good value for money.

What is the lending process

Issues surrounding finance of this type of purchase do however mean that unless you have the cash to to complete when the deed is ready to be signed or know you can access that cash by other means banking on getting a Spanish loan is a risky business. You cannot secure the loan at outset so after you have paid over staged payments which you would use if you could not complete.

Why is it a risk

No Bank in Spain can offer a guaranteed loan that will last until the property is built. Unless the property is only a few months way from completion so 3 or 4 months this means you will have parted with staged payments with no guarantee that when you need it a loan will be forthcoming.

During the build phase things can and do change so lenders may change their criteria, loan to value they can offer or in worst case scenario be able to lend at all as happened in the 2007/8 banking crisis.

Buying off plan should be approached with caution as the risk can be high if you need a mortgage in Spain and advice should be taken before making a commitment.

Read the full article:- Off plan purchases mortgage risk in Spain 

Surprisingly good Spanish loan data

May loans in Spain

Whilst down considerably to 2019 figures Mays mortgage in Spain data was not as bad as could have been expected.

Affect of lockdown 

Given the country was in the height of the lockdown during April when Mays registered completions would have taken place it is a little surprising the figures are not worse than Aprils.

Maybe the time between completion and registration is longer than one would expect and Junes figures will be down on May.

Postive net inflow for Spanish lenders

Numbers of new loans whilst reflecting lower activity remained at reasonable levels and given redemptions were again very low this month for the Spanish Lenders the net inflow to the mortgage books was in fact very positive.

Read the full article:- May 2020 Spanish loan figures

Covid 19 hits Spanish lending levels

Aprils loan levels Spain

Aprils Spanish lending levels were down again on March and it is anticipated a further fall will happen in May.

Spanish Banks net inflows

For Spanish Banks whilst new loans are well down some 18% the number of redemptions has halved from normal levels so there was a net inflow onto the mortgage books.

During lockdown little happened by way of completions and land registry will also have been shut so there will be a delay in processing completions.

New enquiries increase

New enquiries are bouyant but this is just people preparing themselves for a possible purchase later in year. Few new applications were submitted in April and May.

Interest rates

Interest rates held steady and for second month in a row fixed rate product types outstripped variable rates. This is a massive change from the situation 5 years ago when fixed rates made up less than 5% of all new Mortgages in Spain.

Read the full article :- Covid 19 impacts on 2020 Spanish loan levels

February loan levels in Spain

Registered Mortgages in Spain

February figures published by the INE showed a marked increase in loan levels in Spain from February 2019 but a drop against Januarys figures.

This will not as yet be reflecting the situation with COVID 19 but March figures most certainly will.

Average loan size increases

Due to a significant rise in the average loan size which seems to relate to something that happened in Cataluna the amount of capital lent was however above January figures.

The rise in average loan size was very significant so will be an anomaly, what caused this is not explained in the report.

Small increases in interest rates

Interest rates edged up marginally and the level of fixed rates versus variable rate product types remains static.

Andalucia and Cataluna had the best months of all the regions.

Read the full article :- Spanish loan levels up on last year

Non euro earners and Spanish loans

New mortgage regulation in Spain affects non resident borrowers

Since the new regulation was introduced in Spain for lending more and more Banks have removed themselves from offering their full portfolio of offerings to those not earning their income in Euros.

This is due to the requirement under legislation to allow someone to request if FX rates drop by more than 20% that their loan is moved to the currency of their earnings.

Spanish Banks cannot offer all currencies

Many lenders are not in a position to move Spanish non resident loans to certain currencies and do not have the systems or the inclination to deal with more volatile and less traded currencies such as the Dirham.

All lenders in general have removed the access to fixed rates for non euro earners as the currency for the loan has to be bought in for the long term and the cost of any move would be sizeable.

Use a loan broker to find a solution

Whilst it is now more difficult to find providers from non euro earnings at IMS we are still able to place applications and can achieve variable rates for most nationalities.

Read the full article :- Certain non EU earners struggle to get a loan in Spain

Re-mortgages in Spain

Spanish Bank to do re-mortgages in Spain

After many years of all Spanish Banks dismissing the re-mortgage market one major lender has decided to put some focus on this area.

In a year when Covid 19 has disrupted completions and property purchases and after a fraught 2019 when new regulation delayed many Spanish Mortgages they are looking to add new business.

No fixed rate option

Only a variable rate is available but there is no Bank arrangement fee applicable and they will consider allowing any subrogation costs to be added to the loan.

Loan to value cannot exceed 60% and at initial purchase the owner must have put in a minimum of 30% themselves.

No life cover required

A big attraction could be that they will not require life is contracted and many previous loans had this product as compulsory and this has added to the monthly cost even if it was not required.

Read the full article :- Major Spanish Lender puts focus on Re-mortgages.

January loan figures before COVID19 in Spain

Beginning of 2020 looked positive

January Spanish loan figures looked to be a positive start for the year.

In most areas lending was up in terms of numbers of and capital lent despite the fact the average loan size fell quite heavily.

there were nearly 10 thousand more new loans added the Spanish Banks loan book than redeemed in the month and after many months of delayed completions due to new regulation things looked to be getting back to normal.

Interest rates stable

Interest rates were stable very close to Decembers rates and slightly down on last year. Variable rates were still the choice of most borrowers with fixed rates stabilising in last few months at around 42% of all new transactions.

Madrid after a very positive 2019 had smaller levels but other areas saw significant growth.

Impact of Covid19 on the Spanish lending market

COVID 19 and the shut down of Spain will cognate all this as completions started to dry up back end of February and new applications are more or less zero.

What impact for the full year this will all finally have is unknown at present but for sure 2020 will now be an even more challenging one than 2019.

Read the full article: - Spanish loans the calm before the COVID19 storm