Hot Topics - Money Matters - Mortgages

If you plan to get a mortgage, it is better to obtain an agreement in principle at an early stage so you know how much you have to spend on a property.

There are two options:

Against your UK property. The mortgage will usually be in Sterling.

Against the Spanish property. Here the mortgage will be in Euros.

Interest rates vary, and of course if you borrow in Sterling you run the risk that the Euro may strengthen against the pound, and you lose out. Of course, the opposite may happen too.

If you are going to let the property, you are unlikely to get tax relief in Spain on a UK mortgage.

The main differences between an English and Spanish mortgage

Most Spanish mortgages are usually granted for up to 15 years, not 25 as in England. However, competition between lenders has meant that mortgages of a longer duration are now obtainable if you shop around. Normally, the mortgage must have been repaid by your 70th birthday.

There are often restrictions or penalties for early payment of the loan (usually 1%).

The loan will be in Euros.

The maximum loan is generally 60-75% of the value of the property.

Most Spanish banks are not allowed to lend you more than 30-33% of your net disposable income.

Spanish mortgages have high set-up costs (2-3%) but benefit from a lower Eurozoneinterest rate.

Tax
Note that it more tax efficient to have a property (and mortgage) in joint names. Remember though that you cannot transfer ownership between spouses without liability to tax (unlike in the UK). See theBuying a PropertyandResidency & Taxsections for more information.