Understanding re-mortgages in Spain with or without extra funds

Re-mortgaging in Spain is different to other countries

IMS have been placing mortgages in Spain for many years. We understand and can explain the pitfalls of moving your mortgage, before it has cost you lots of wasted time and money.

Moving lender on a regular basis to gain better rates or release equity ,which is standard in other countries is neither possible nor cost effective in Spain.

Remortgage lenders

 

Buying out an existing owner.

If you own a property jointly with another person and you wish to buy them out gaining some lending to buy their share may be possible. Generally speaking you can be offered up to 70% of the level of the cost of the buy out. This means you will need to find the 30% plus costs of transfer yourself.

Removing a second person from the purchase deed is not as simple as it is in other countries and you will pay transfer tax on the amount of the cost you are paying for the benefit of taking over 100% ownership.

If the property does not have a loan already then the Banks in Spain may offer a Mortgage in Spain at the 70% of cost to you in order to help you take over the property. There are no set products and each application is reviewed on its now merit.

If a mortgage is already jointly held it is most unlikely a new lender will re-mortgage the property allowing for the loan to be paid off and extra finds raised, if this is the situation it is bets to talk to the existing lender rather than looking for a new Bank.

In the case of divorce where there is a court order in the country of residency the Banks may consider a re-mortgage with funds to make the buy out.

What are the drawbacks of a re-mortgage in Spain

Whilst re-mortgaging with or without raising extra cash in Spain has in the past been in the past possible often the costs of doing so far outweighed any benefit you might have achieved and was rarely the right advice for you to do so for rate benefit alone.

Because of the current increases in costs of funds for the Spanish Banks, the margins being charged on new loans are now normally in excess of margins held on loans set up previously. It is not therefore normally possible to improve on the rates of existing loans.

With the growth of fixed rate products and because they fixed rate products are very competitive more and more mortgagees are looking to see if they can move their existing loan. At present even though the market conditions may for the first time suggest there is a benefit to doing so the lenders are not offering the finality to do so.

When can I take out extra funds in Spain

Currently it is very difficult to re-finance in Spain. Spanish Banks are only providing this facility for home improvements or in a few instances for buying another property in Spain. This is not an area like re-mortgaging lending that the Banks are currently looking to provide a service in. For specific clients in certain circumstances something may be possible but moving of funds to outside Spain will not be possible.

Taking finance on an already owned property is only possible even when the funds are for improvements of the property is owned with no current Liens. If a mortgage is already secured then the applicants only option would be to see if their existing lender would allow for a further advance.

To check suitability of a remortgage email us today on advice@imsmortgages.com with an overview of your situation.

Why are Spanish Banks not offering Re-mortgages

Spanish Banks are focused on mortgages for purchases and no Banks are currently offering any type of re-mortgage facility.

The only time a re-mortgage of an existing loan will be considered is in the situation where the client has an old interest only mortgage for the full term and this facility is coming to the end and the capital must be paid back.

This type of loan was granted in the past by RBS/Nat West, in Gibraltar. Leeds and Holdback, Jyske Bank and on some occasions Barclays. Because none of these lenders are offering Spanish Mortgages any more or in the case of Barclays have been bought out in Spain the existing lender cannot offer a solution to a mortgagee that expected to re-mortgage the loan when the interest came to an end.

Whilst none of the lenders in Spain have any re-mortgage product or wish to get involved in re-mortgages in these instances they will consider an application on a case by case basis. Maximum loan to value is likely to be 60% and in general where granted the new Bank does expect the loan capital to be reduced from existing level.

There is no indication that in 2017 the situation will change and Spanish Banks will involve themselves in re-mortgage activity.

What is the process for a Spanish Re-mortgage

It is important if considering moving your mortgage to another Spanish Bank that you understand on what basis you could make the move. This is dictated by legislation. There are two ways by which a loan can be moved.

Subrogation moving existing Spanish Mortgage to a new lender

In Spain you can subrogate or transfer an existing loan to a new lender. Not all lenders will subrogate but if they do you will have to meet and follow the laid down procedure as per the government legislation of 2006. Subrogation has the benefit of reducing significantly the cost of moving by avoiding mortgage deed tax; a cost that is applicable on all new loans in Spain, and equates to around 1.8% of lending. Any extra cash taken however would attract all normal costs.

What are the rules for subrogation of a Spanish Loan

To avoid the mortgage deed tax the new lender must offer an improved overall interest rate (TAE) and or an extended term and then via the notary your existing bank must be given 21 days to match the new terms or release you. Movement of the loan to interest only, extra cash out, removing an existing mortgagee or any other features being provided do not constitute reasons for subrogation being allowed and therefore the mortgage deed tax saving.

Your existing bank can match interest rate but refuse to meet any other features to force the subrogation process to be stopped.

Setting up a new Spanish mortgage with a new lender

The second means of re-mortgaging in Spain is straight forward closure of one loan and inception of a new one. In this instance you have no government process to follow and are free to leave your existing lender at will, but all costs of moving the mortgage including mortgage deed tax will apply.

What cost do apply when moving a mortgage a Spain under subrogation rules

Whilst you save on mortgage deed tax you will incur some of the other normal costs of mortgage arrangement. These may include a valuation fee, a bank arrangement fee and notary and land registry costs. If the new lender does not cover or contribute to these costs you can expect them to total to round 2% of your loan amount and will have to be covered by you or added to new loan if loan to values allow.

What are the costs of setting up a new Spanish loan

In total these costs will be around 4% of lending This second means of re-mortgaging is straight forward closure of one loan and inception of a new one.

What are the current maximum loan to values available for a re-mortgage in Spain

Maximum loan to values, when available on standard re-mortgages will be 60% for non residents and 80% for residents of Spain.