All change in the Spanish property mortgage market

Spanish Prime Minister Mariano Rajoy is on a clean up mission to try to put his country’s mortgage market back on track.

Gone are the days when local newspapers had adverts offering fake P60s for credit purposes but it could take some time for the lending industry to become more mature, according to experts.

The Spanish government is, for example, forcing takeovers and mergers to accelerate the change. Banco Sabadell acquired CAM bank for €1 in December 2011 and BBVA acquired Unnim bank for the same price this month.

Whilst Spain didn’t have official subprime mortgages in the same manner as the United States, throughout the late 2000s it did fall victim to unrealistic mortgages being handed out by greedy banks with the help of unscrupulous mortgage advisers, real estate agents, lawyers, surveyors, valuers and accountants.

The consequence today is banks having to repossess a significant number of homes making them huge real estate owners and putting a strain on their balance sheets, particularly as Rajoy is asking banks to make additional provisions.

‘As the property market in Spain boomed, many banks took a naïve approach to lending money and they are suffering for it now. Whilst the UK has various checks and balances in place to prevent the recurrence of scandals such as the endowment mortgage mis-selling of the 1980s and 1990s, Spain has yet to get a watertight grip of its financial products although Rajoy is making huge strides,’ said Marc Elliott, independent mortgage consultant and owner of Fluent Finance Abroad.

‘Deals such as those seen in the past are either non existent or hard to find but if you have a good income and clean credit history the banks will lend. Certain banks did not fall into the reckless subprime trap and are lending pretty much as they were prior to the credit crunch,’ he added.

Dependent on the individual application, a general rule of thumb in 2012 is 70 to 80% for Spanish residents and 60 to 70% for non Spanish residents. Current lenders will now lend only on the purchase price or the valuation, whichever is lower.

There are even 100% mortgages available for properties or developments that are directly owned, that is repossessed, by the banks. But these are not available for other properties.

‘If you are a first time buyer and you don’t have a large cash deposit then it might be wise to consider a bank property. If you have a sizable deposit at your fingertips it would probably be better to look at the traditional real estate market as these properties tend to be slightly better value for money,’ explained Elliott.

‘At the moment banks are looking to get the best price possible for their properties to try and recoup the original funds that were lent, they do this is by slightly inflating asking prices and offering excellent finance terms such as little or no money down deals,’ he added.

He also pointed out that it is extremely difficult to release equity from a Spanish property at present and it is best to speak to numerous banks or seek professional independent advice from a qualified person operating in your area.

‘Always speak to more than one mortgage consultant to make sure you are satisfied that you are getting the best person to represent your interests. If anyone suggests that obtaining mortgage finance in Spain is easy, they are not being completely truthful,’ said Elliott.

 

Article: Spanish property mortgage market

60 second interview: Marc Elliott of Fluent Finance Abroad

60 second interview

What does it say on your business card?
Marc Elliot, Independent Mortgage Consultant, Fluent Finance Abroad. But since the credit crunch I should add “Bank Credit Department Cheerleader/Animator”. I could include “Agony Aunt” at times too!

Where are you based?
Lucky for me Marbella on Spain’s Costa del Sol – they’d have to drag me kicking and screaming from such a lovely place. I actually live and work in Marbella’s Old Town, just a stone’s throw from the beach, where the tapas bars and narrow picture-postcard streets create such a relaxing atmosphere that sometimes it’s easy to lose track of time, especially in the open-til-late bars, but that’s Spain for you I guess.

What is your business?
Well I live and die by what the banks do, so therefore I have had to diversify into some unexpected and some not so pleasant areas. I now advise some clients on how best to deal with unaffordable mortgages and analyse what fantastic property buying opportunities can be had via my legal and banking contacts here on the Costa del Sol. My main concern and wish is to get back to my core business which is money lending and I am very pleased to say that 2012 has seen some kind of normality return to the market. I also arrange insurances for my clients.

How many people do you employ?
I currently have two partners specializing in other areas such as international pension transfers and general advice or guidance with Spanish beaurocracy. I do not directly employ either.

What about buying/mortgage trends?
As a money lender, I tend to deal with a large number of real estate experts based here and the feedback I get is that large numbers of people are still looking at picking up a holiday homes in Spain – this is good news. They seem to have larger deposits than before and are looking at longer term lifestyle purchases rather than purely investment deals which the banks, the banks have more time for this more realistic buying activity. Clients are not just buying the first thing that comes their way and are making various trips before they take the plunge, this of course makes the estate agents work harder which keeps them on their toes. Remember that if you bought property in Spain in the past and made use of it for holidays for family and friends, the “lifestyle returns” of your property investment are hard to quantify – even if the current cash value isn’t what you’d expected to date – and that will continue to be true in the future. The last trend is that Spain is certainly a far more transparent place in which to do business these days, this can only be a good thing and enhance confidence in the buyer.

How interested are you in property?
On a personal level my interest in property is not that great, I leave that to my girlfriend. Like most ladies she enjoys having a nose at what can be done creatively with a property to add something to it. On a purely business level, I do find property very interesting given these challenging market conditions.[:es]

Marc_Elliot60 second interview

What does it say on your business card?
Marc Elliot, Independent Mortgage Consultant, Fluent Finance Abroad. But since the credit crunch I should add “Bank Credit Department Cheerleader/Animator”. I could include “Agony Aunt” at times too!

Where are you based?
Lucky for me Marbella on Spain’s Costa del Sol – they’d have to drag me kicking and screaming from such a lovely place. I actually live and work in Marbella’s Old Town, just a stone’s throw from the beach, where the tapas bars and narrow picture-postcard streets create such a relaxing atmosphere that sometimes it’s easy to lose track of time, especially in the open-til-late bars, but that’s Spain for you I guess.

What is your business?
Well I live and die by what the banks do, so therefore I have had to diversify into some unexpected and some not so pleasant areas. I now advise some clients on how best to deal with unaffordable mortgages and analyse what fantastic property buying opportunities can be had via my legal and banking contacts here on the Costa del Sol. My main concern and wish is to get back to my core business which is money lending and I am very pleased to say that 2012 has seen some kind of normality return to the market. I also arrange insurances for my clients.

How many people do you employ?
I currently have two partners specializing in other areas such as international pension transfers and general advice or guidance with Spanish beaurocracy. I do not directly employ either.

What about buying/mortgage trends?
As a money lender, I tend to deal with a large number of real estate experts based here and the feedback I get is that large numbers of people are still looking at picking up a holiday homes in Spain – this is good news. They seem to have larger deposits than before and are looking at longer term lifestyle purchases rather than purely investment deals which the banks, the banks have more time for this more realistic buying activity. Clients are not just buying the first thing that comes their way and are making various trips before they take the plunge, this of course makes the estate agents work harder which keeps them on their toes. Remember that if you bought property in Spain in the past and made use of it for holidays for family and friends, the “lifestyle returns” of your property investment are hard to quantify – even if the current cash value isn’t what you’d expected to date – and that will continue to be true in the future. The last trend is that Spain is certainly a far more transparent place in which to do business these days, this can only be a good thing and enhance confidence in the buyer.

How interested are you in property?
On a personal level my interest in property is not that great, I leave that to my girlfriend. Like most ladies she enjoys having a nose at what can be done creatively with a property to add something to it. On a purely business level, I do find property very interesting given these challenging market conditions.