Property Finance
Mallorca Real Estate Search have teamed up with independent mortgage brokers the The Mallorca Mortgage Business (part of the same Inversiones Novi group of businesses as Mallorca Real Estate Search) to bring clients the best mortgage deals on the market. From normal repayment mortgages, interest only, or a combination of the two, our partners will seek out the best deals for your property purchase (investment and owner occupation), remortgage, or bridging loan. If you are looking to build your own home they can also help you with all your development finance needs here in Mallorca and on Mainland Spain.
Just complete the Mortgage Quotation Form for a free confidential, no obligation, mortgage quote. Remember there are absolutely no commission charges for any of these services.
Set out below is some general information on why you might want to consider a mortgage and what you will need to do to complete a successful mortgage application.
Introduction to Mallorca, Balearic Islands & Mainland Spain Mortgages
When purchasing a property in Mallorca, Spain or indeed anywhere in the world, there are a number of reasons why you may want or need to consider taking out a mortgage. These in their turn will have a bearing on how and where you organise the loan. Let us firstly look at why you might want to take out a loan, then the mechanics, and finally how and who can arrange it.
Why would I want a mortgage?
- You don't have the full amount of capital yourself to complete the purchase - the most obvious and common reason! Few of us have either the level of capital required to acquire a property out right, especially if it is a second home or, even if we do, the inclination to sink it all into one property rather than leaving some of it in other saving or investment vehicles.
- You want to reduce liability to future inheritance tax. We will not go into detail here and nor are we, at Mallorca Real Estate Search, specialists in the fields of tax or general financial advice, but this is a serious consideration that is generally overlooked by purchasers.
Interestingly there are now a number of innovative products being offered on the market which not only assist with reducing an inheritance tax liability, but also have a net income generating angle, and are thus suited to both the retired community or anyone looking for a source of additional income. It is however very important that you receive specialist advice when considering these products to ensure they fit properly with your specific requirements and risk profile.
We work with two of the largest and most respected financial advisors, specialising in the expat community, so please contact us if you wish to examine any of this in more detail. - You want to improve your investment return ie your return on equity/capital employed. This is of particular interest if you are buying a property predominantly as an investment and will be receiving rental income. Not only will your rent generally cover your mortgage repayment liabilities, leaving you with a net cash flow, the underlying capital you have put in will be working much harder for you.
By way of example. You buy a 200,000€ apartment and take out a 70% mortgage ie loan of 140,000€ leaving you to put in capital/equity of 60,000€. During the first year property prices go up by 10% taking the value of your property to 220,000€ ie 20,000€ increase. In this case your return is not the 10% it would have been without the mortgage, but is 20,000€ on your capital of 60,000€, ie 33%.
If investment is your core objective, talk to us also about the advantages of interest only mortgages. The Mallorca Mortgage Business work with specialist brokers that can get interest only loans throughout the term of the loan. Please click to Contact us.
What do I need to get a mortgage and how much will I be offered?
- As a rule of thumb the maximum loans for non residents are 70% of valuation and 80% for residents. In practice you may get a little more both as a non resident or resident, with 100%+ loans increasingly common for the latter.
- Loans of course are subject to status and again the rule of thumb is that the monthly repayments should not exceed 40% of net monthly income.
- Another issue is age, specifically in relation to the term (length) of the loan. Generally the term will be no longer than the years until your 65th - 75th birthday (different banks have different rules) or, in the case of a joint loan, the years to that bithday of the youngest of the two applicants. This can have a significant impact on monthly repayment levels, the ratio between those and net income, and thus ultimately how much you can borrow.
- As in any other European country you will need to produce proof of income (pay slips; year end tax returns etc) and liabilities (bank statements etc) to support your application. If you are serious about buying during a visit to the Island bring this information with you to help speed up the process.
- One important point is that you do NOT need to have identified a property in order to get an "in principle" mortgage offer that is only subject to an appropriate valuation and survey, by the bank, of the property once found. Getting the bank's offer of a mortgage, costs nothing and allows you to know from the outset what your precise budget is and, once the property is identified, will assist you in moving much more quickly, and with more certainty, to signing of the Private Contract and subsequent Completion.
Where should I take out the mortgage and who can help me?
Above we have spoken about Spanish mortgages taken out on the property to be acquired. That is not of course the only option or consideration.
- You could take out the loan against other assets or property be it in Spain / Mallorca or elsewhere. This needs to be carefully considered, particularly if the loan is in a different currency to the one you are using to buy the property ie the Euro. Irrespective of movements in the value of the underlying property, movements in the exchange rate could materially impact on your investment where the loan and property are in different currencies. Generally perceived wisdom, unless you are a professional currency speculator (!!), is to keep the loan and underlying assets in the same currency.
Of course if you take the loan out against another property, or asset, the potential Inheritence Tax liability benefits would not accrue (see above).
It is also important to consider how and where you will be funding the mortgage repayments from, specifically if these are from a different currency eg Sterling. Strategic Currency specialists like HIFX can fix an exchange rate for up to two years for monthly transfers from the UK to Spain / Mallorca. Contact us for further information. - Assuming you take out the loan in Spain / Mallorca you have two main options - source the loan yourself through the main high street banks; or go via a broker. At Mallorca Real Estate Search we have teamed up with our partners The Mallorca Mortgage Business to offer clients a professional and bespoke service whatever your requirements.
Generally the rule of thumb is the more specialised, or exacting, the mortgage required, the more beneficial it is to go via a broker with their access to the widest number of different banks and financial institutions
Just complete our Mortgage Quotation Form for a free confidential, no obligation, mortgage quote.
Tel. +34 661 560 284 Fax eMail info@mallorcarealestatesearch.com
