Remortgages, Equity Release, or Refinancing Against an Unencumbered Property in Spain
Raising funds against Spanish property is far more restricted than in most other countries. This applies whether you’re remortgaging, releasing equity, or refinancing a property you own outright. Spanish banks keep tight control over both eligibility and how released funds can be used. It’s worth understanding your realistic options before assuming this route will work for your situation.
What Are the Market Conditions for Refinancing and Equity Release in Spain?
Since 2007, many Spanish banks have withdrawn from offering refinancing in Spain, now providing only straightforward purchase mortgages on residential properties. Despite this, some options may remain. Equity release is normally only considered where the funds will be used for improvements to the property, or to buy another property in Spain. Moving new mortgage funds out of Spain isn’t possible, since Spanish banks keep control of the funds to ensure they go to their intended use.
Are There Any Other Options for Refinancing in Spain?
For high-net-worth individuals looking to refinance or release funds to invest, some private banking options exist. In every case, you’ll need to be a private banking client, with a minimum of €1m under management.
Refinancing an Existing Loan
Spanish banks generally aren’t focused on this type of lending.
A few banks may consider taking on a loan currently held by another lender in one specific situation: where the mortgage was set up on a fixed-term, interest-only basis, that term has ended, and the capital now needs to be repaid. For borrowers in this position, a handful of lenders may allow refinancing so the existing lender can be paid off.
Where this is possible, expect to have to reduce the level owed and move to a repayment basis, with costs equating to around 2% of the amount borrowed. There are no set products for this — every application is handled on a case-by-case basis.
Contact us today for information if you’re in this situation.
Loan-to-Values for Equity Release in Spain
Releasing equity through refinancing in Spain is potentially available up to 60% loan-to-value. The destination of funds must meet the bank’s criteria — Spanish banks keep control of where and to whom funds are paid, to ensure they go to the agreed use, and moving released funds out of Spain isn’t allowed with any Spanish lender.
Normal rules can be flexed for lower loan-to-values — in particular, the bank may be less strict about controlling what happens to the funds.
Mortgage Product Types for Refinancing in Spain
Where equity is released, these mortgages are normally variable trackers, with most lenders linking to the 12-month Euribor plus a margin. All loans are on a repayment basis unless arranged through a private bank — IMS doesn’t arrange lifetime-style loans, though these may exist for Spanish residents through other providers, and there are no long-term interest-only options in the non-resident market.
Bridging finance is a further option for some situations, offered through specialist bridging companies rather than mainstream banks. These loans are typically interest-only, with costs rolled up into the loan rather than paid monthly, and run for 6 to 24 months. Expect a minimum loan size of around €750k, alongside high interest rates and set-up costs compared with a standard mortgage.
What Interest Rates Can I Expect When Raising New Funds in Spain?
Few lenders offer this facility, so choice is limited. Where a bank does offer it, pricing is normally in line with their standard purchase mortgage rates. Margins vary from bank to bank, but you can generally expect to pay around 4% above the 12-month Euribor.
To find out what product might suit you, email us today with an overview of your situation and what you need.