Spanish Mortgages: A Review Of Lending December 2009


Despite the current banking issues obtaining a mortgage for buying in Spain is still available. Lenders like Halifax, Lloyds with their UK roots remain committed to keeping a presence in Spain.

Spanish banks are also still providing finance.

The key change from a couple of years ago is the risk criteria’s are now rigidly followed; pricing this being the margin above Euribor the banks charge has increased considerably and overall terms and flexibility of product have tightened. Euribors themselves remain at an all time low, which means despite margin increases rates are around 2.5%.

The majority of banks are now back to 2001/2002 loan to value criterias. This means most banks provide a maximum of 60% of purchase price and in most instances limit this also to 60% of purchase price. A few banks remain that may provide a loan larger than their percentage of valuation but they  will still have maximum limits on what percentage of purchase price this will be. 100% financing is a thing of past.

One bank is currently offering 70% of valuation for non-resident mortgages as standard and Santander via its Abbey National arm will consider 80%.

Underwriting is very rigid in current environment and some purchasers particularly those involved in the property industry in UK may find themselves precluded from borrowing however for most clients who fall within current debt to income ratios; whilst the level of paperwork required to prove affordability will be very high; a loan will still be available.

Interest only facilities for up to 5 years are available but most Spanish banks are now only offering repayment loans with terms up to 30 years.

Maximum ages have dropped with most mainstream lenders now wanting the mortgage paid off by age 70 years.

Most buyers still find obtaining a Euro mortgage the most attractive option given current exchange rates between the pound and the Euro. Many cash buyers still want to consider a Euro loan with a view to paying mortgage off when and if exchange rates recover to historical levels. Taking a currency loan remains unusual and only suitable for those clients who understand and can manage the currency rate fluctuations.

It is difficult to see banks improving flexibility, relaxing criteria’s or aggressively seeking lending in 2010 however, the market seems to have bottomed out and it is expected that current criteria’s will not worsen in the next 12 months.

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