Anti-Brexit Spanish Mortgage Strategy

If you are being put off buying a Spanish property because of the drop in the value of the pound you need to read our Anti-Brexit Spanish Mortgage Strategy carefully.

You may feel that property prices in Spain will be affected by fewer British buyers coming into the market although it is important to bear in mind that there are still many nationalities eager to purchase here and in particular French, Belgians, Germans, Scandinavian, Eastern European / Russian and Middle Eastern clients. We even have buyers from Australia, New Zealand, North America / Canada & South Americas getting involved in the Spanish property market.

This means that prices are still, in our opinion, on an upward trend and there seems to be no evidence that this is going to change anytime soon. We see prices still increasing in Spain.

As the value of sterling has dropped by 18% against the Euro since the Brexit referendum on the 23rd June 2016 we thought it would be a good idea to try and explain how using a Spanish mortgage to purchase a property in Spain or any other EURO denominated property can be a very good idea.

The rate of exchange on the 22nd of June 2016 was around the 1.31 mark and as of today (23rd October 2017), we see sterling has dropped to 1.11.

We speak to many real estate agents that specialise in selling to British based buyers of Spanish property and the feedback we get is that the drop in sterling is not really having an effect on the amount of enquires they are receiving but it is having an effect on the amount of their clients actually taking the plunge and purchasing the property of their dreams in Spain.

At Fluent Finance Abroad we constantly keep an eye on how our market is changing and study ways in which we can use the tools at our disposal to give our clients an advantage given the state of market conditions at any given time.

Hence we are now finding that savvy British buyers are not being put off buying property in Spain as they are taking advantage of the availablility of non residents Spanish mortgage lending to facilitate and hedge against the low sterling value and buying a property using a Spanish mortgage.

How the Anti-Brexit Spanish Mortgage Strategy Works.

Mortgages in Spain are expensive to put in place. However even allowing for the cost of setting the mortgage up, in the long term clients will potentially greatly win out by taking a Spanish mortgage now whilest the exchange rate is so low.

If we take the example of a client, who is going to purchase a property for 300,000€. If they buy in cash with all taxes and fees added to the price, they will pay a total of approximately 337,500€ for the property. At todays exchange rate of 1.11 the client would need to transfer £304,054 to purchase the property in cash.

Assuming the client took a maximum 70% Spanish mortgage on the property, the amount they would need to pay  for the property would increase to 345’000€ to cover the extra bank fees or £ 310,810 @ 1.11.

A 70% mortgage would be 210,000€ (This reduces the amount they need to transfer by £189,189 @1.11 to the £, meaning they need to transfer a total of £121,621 instead of the full £310,810 at this stage in the buying process).

Once Brexit has completed (or cancelled depending who whose opinion you agree with) and things have settled back to a degree of normality in 2-3 years time the exchange rate should recover to around the pre Brexit rate of 1.31 to the £. At this point the client would need to transfer an amount of £160,305 to clear the mortgage completely.

This makes no allowance for the amount the client would have paid off the mortgage during the time they had it. Even taking into account the extra 7,500€ paid in Spanish mortgage set up fees the client has still managed to save themselves  £28,884 on the price of their property by taking advantage of the poor exchange rate.

It is important to point out that one of the main advantages of a Spanish mortgage is its flexibility when it comes to making early redemption payments of the loan amount either partially or in full. The fees to reduce the mortgage or to cancel the entire mortgage are very small and so you will have a great deal of flexibility to reduce the mortgage when the exchange rate goes in your favour. For example if you reduced your Spanish mortgage by €10,000 in the first five years, the charge would be €50 and after five years this is reduced again down to €25 for every €10.000 you reduce the mortgage amount by.

We are a long-established firm of independent mortgage brokers based locally in Spain and we have agreements with all of the major lenders. If you would like to discuss the Spanish mortgage market with us, we would be delighted to have a meeting or a telephone call to inform you of all of your finance options and to tailor an offer specific to your needs.

We look forward to hearing from you.

Contact us today.

Vive La France!

Les résultats des élections présidentielles en France ont laissé l’Union Européenne pousser un très grand soupir de soulagement. La peur d’avoir un gouvernement d’extrême droite au pouvoir en France, qui à son tour aurait surement conduit à la désintégration de l’Union Européenne, a été apaisée (du moins pour l’instant) et il parait que Macron, qui est un promoteur très fort de l’UE, va associer ses forces avec Angela Merkel pour faire que les négociations du Brexit soient les plus difficiles et les plus chères possibles pour le Royaume Uni.

De toute façon Macron a déjà surmonté le premier obstacle, qui était de gagner l’élection présidentielle. Maintenant il doit travailler très dur pour essayer de convaincre les électeurs français. Il y a eu plusieurs millions qui n’ont pas voté parce qu’ils n’auraient jamais considéré voter pour une nationaliste d’extrême droite comme Le Pen, mais, en même temps, ils n’auraient pas voté pour Macron parce que

beaucoup de français le considèrent, malgré sa jeunesse, comme un représentant de la vieille politique puisqu’il était ministre dans le gouvernement de François Hollande.

Macron doit donc travailler très dur pour convaincre ses électeurs de gauche et aussi de droite. Il est le Président de la République le plus jeune depuis Napoléon, qui a gouverné en France il y a deux siècles. Sa jeunesse, son manque d’expérience et une population française très sceptique, signifient que lui et son parti politique ‘En Marche’ auront une lutte difficile pour les convaincre sur ses politiques en faveur des entreprises, qui surtout vont déréguler le marché du travail afin de créer de nouveaux emplois et surtout des emplois qui sont respectueux de l’environnement. On verra si Macron et ‘En Marche’ peuvent gagner les sièges suffisants au parlement pour pouvoir défendre ses politiques.

Ces derniers temps et en particulier depuis la crise, les français sont devenus très intéressés par l’achat de propriétés en Espagne. La France est le pays de l’Union Européenne qui achète la plupart des biens en Espagne après les Britanniques, qui actuellement sont en train de négocier le problème du Brexit, et suivis par les Russes, Belges, Allemands et Suèdois. Tous ont acheté plus de propriétés qu’en 2007. Les belges par exemple n’étaient même pas sur la liste des top vingt acheteurs étrangers en 2007.

Maintenant que Frexit n’est pas encore une menace et en même temps que les acheteurs français n’ont pas de risque à l’échange, les résultats des élections françaises ont ouvert les portes à une augmentation encore plus grande du nombre d’acheteurs français qui cherchent des propriétés de bonne qualité au soleil d’Espagne. Historiquement le comportement des acheteurs étrangers et leurs intérêts

croissants pour le marché en Espagne ont anticipé une augmentation positive du marché immobilier en Espagne. Depuis 2011, le nombre d’acheteurs étrangers a commencé à croitre et en particulier, les acheteurs des pays plus riches de l’Union Européenne. Tout indique que le voisin au nord de l’Espagne croit fermement que le marché immobilier en Espagne est en très bonne forme et un bon rapport qualité prix pour l’investissement dans une deuxième résidence en Espagne.

En raison de la popularité des propriétés en Espagne pour les clients français, les banques espagnoles ont hâte de prêter aux clients francophones et elles ont conçu des produits hypothécaires espagnols en pensant à eux. Fluent Finance Abroad est un des brokers hypothécaires les plus grands en Espagne et nous sommes ravis d’aider les clients francophones en leur cherchant les meilleures conditions pour leur hypothèque en Espagne. Nous pouvons communiquer avec les clients francophones dans leur propre langue et les aider avec le processus d’achat en Espagne du début à la fin

British Banks and mortgages in Spain

British BanksHaving been arranging mortgages in Spain for over 13 years I feel like we at Fluent Finance Abroad, are well placed to inform you of how British Banks faired when it came to lending in Spain.

When I arrived in Spain back in January 2004 I walked into a frenzy of Spanish mortgage lending activity.

It seemed that there were hundreds of lenders all competing for the flurry of consumers from Spain and other parts of the world that fancied a flutter on investing in the Spanish property market.

Not only were Spanish lenders open for business, but there were a huge amount of foreign banks obtaining lending licences so that they could dish out cash on Spanish shores.

Who were the main players that were involved in lending in the Spanish property boom?

Well we had lenders from countries like Denmark, Holland, Norway, Sweden, Switzerland but the most prolific were the British banks.

For years UK banks were a high street presence in Spain and it was a common sight, especially in coastal areas to see Halifax Spain, Barclays Spain, Lloyds International Spain, Abbey National.

We also had lenders pass-porting in from Gibraltar of course, these included the likes of RBS / Nat West, Leeds Building Society or Norwich & Peterborough and they all seemed to be enjoying capturing a huge amount of new business and their respective head offices were keen to keep this going.

Why were British lenders so popular in Spain?

There are 3 main reasons;

  1. They were attractive to the biggest buyers of Spanish property which were buyers from the British Isles.
  2. They understood the income verification paperwork which would be presented by British clients, especially the self-employed British entrepreneur or property landlord.
  3. All British banks offered the holy grail of interest only Spanish mortgages that the Spanish banks were not prepared to offer.

All the reasons above seem reasonable at the time but then came the credit crisis.

Spain was hit extremely hard when credit markets dried up, but not only were Spanish bank hurt when the crisis hit.

British banks were equally affected, we all remember Northern Rock & Bradford & Bingley having to be turned into the bad bank of the UK.

British banks suffered so badly in the crisis they packed up their bags and left Spain pretty quickly and refused to lend anymore although they had huge toxic mortgage books which needed to be sorted out and cleared off their balance sheets.

Halifax Spain was sold to Lloyds and then Lloyds International then sold themselves to Banco Sabadell who now own TSB which split from Lloyds a couple of years back.

What’s the problem British lender face now?

This is a simple question to answer.

As most of the Spanish mortgages UK banks gave out were done on an interest only basis, the debt has not reduced down over the years.

The issue is that Spanish properties have reduced in value by as much as 70% in some areas and therefore many UK borrowers in Spain are now left with massive negative equity against their Spanish property.

The Interest only term do not go on for ever meaning that UK banks can now start calling in the debt.

This means that even if the owners sell their properties, they still have massive debts still to pay back to the bank which most borrowers are unable or unwilling to do.

Don’t despair, you must realise that this is as much of an issue for the British lending institution as well as it is for you, there are many reasons for this but a main one is that it can be a long and costly process to take legal action against a Spanish mortgage non payer.

The banks that are affected by negative equity issues in Spain are Banco Sabadell, Lloyds International, Halifax Hispania, Leeds Building Society Spain, Norwich & Peterborough, Nat West RBS Spain & Gibraltar & Jyske Bank.

If you have a mortgage in Spain that is in negative equity you do need to speak to a Spanish mortgage expert at Fluent Finance Abroad, we are able to guide you and help you give the property back to the bank, using current Spanish mortgage law, and leave the debt being 100% covered by the asset in question.

If you use current mortgage law in Spain, you are able to repay the whole debt, including community fees and property taxes by giving back the property.

You do need to know the law and therefore Fluent Finance Abroad Mortgage Brokers are best placed to assist.

Case Study:

Mr. JM bought in 2007 in Duquesa with a 100% mortgage from Halifax Spain for 275.000 € on an interest only basis, the debt never reduced and today the property was valued at 120.000 € meaning the client had a 155.000 € shortfall.

His bank, now Sabadell, informed him that his interest only payment of 500 € per month was ending and that his payments were rising to 2300 € per month which the client could not afford to do.

He approached us and we successfully managed to give the property back to the bank, witnessed by a Spanish notary issuing a certificate of full payment, meaning the client walked away from a serious debt in Spain.

The client had a number of property assets with equity in them so the fact that he has a legal document stating that he didn’t have a debt in Spain means that he and his family can sleep well at night knowing that the Spanish lender will not seek repayment via the county court system in the UK or Ireland.

If you have any questions please get in touch with us and speak to one of our a Spanish mortgage experts who can advise you and can help in many ways.

10 reasons for a Spanish mortgage when buying property in Spain!

1. If your liquid funds are in a currency other than Euro, you could fund part of the purchase by getting a Euro Mortgage therefore offsetting any currency fluctuations when it comes to sending funds to Spain to cover deposit and costs.

2. You may feel that your cash budget doesn’t get you the property you really want so getting a Spanish mortgage can give you the right amount of cash so you can purchase your dream property in the location you desire.

3. If the property is for investment and you wish to receive a rental return, it is worth considering buying a better property in a more desirable location, as these types of properties are more likely to get you a better rental return on your investment.

4. Interest rates are very low at the moment, therefore our clients are taking advantage of these historic rates in order to make the most of their cash and using their liquidity for other important things or investments.

5. Raising mortgage finance against unencumbered Spanish properties is almost impossible and therefore Spanish properties are very illiquid, meaning that the property would normally have to be sold to release quick cash against it for any reason, apart from home improvements. There are specialised lenders which can do this type of lending but tend to be more expensive than the high street options who do not entertain this at all. We get many enquiries from old cash buyers desperate to release funds to sort issues out back home or invest in other projects or investments but come to realise that they should have bought with a mortgage in Spain and therefore not tying up their cash. It can take a long time to sell a property in Spain just like in any other country.  Property is not a very liquid asset like bonds and shares because it cannot be sold within minutes. It can take several months.

6. The debt is against the asset in the country where the asset is held i.e. Spain. This is a good idea mainly because if there was an issue in your home country, the lending would remain in Spain and it would be difficult for the Spanish lender to raise a concern in the country where you are resident.

7. Spanish banks will do their own legal due diligence against the property meaning that if the bank will not lend against the property, it probably isn’t worth buying and it may even have legal issues such as not being properly registered. This offers you, the buyer, an extra layer of security when you purchase.

8. Short term Spanish mortgages are available so you don’t have to be tied into a long term mortgage here. You can obtain a flexible mortgage meaning you can cancel the mortgage at any time without incurring heavy redemption penalties. A perfect example of this is if a client is expecting a lump sum in the near future (i.e. tax free pension lump sum or a sale of a property elsewhere or a bonus payment from your employer), the mortgage can be cancelled in full or part leaving no charge against the asset.

9. You may have the ability to purchase more than one Spanish property if you wish to create a small holiday letting portfolio here in Spain. Contact our team and we can advise you as the the best way to do this.

10. Age is not much of an issue as lenders in Spain are able to lend on pension income.

Calling all High Rollers- Bell & company bring ‘Casino Royale’ inspired glamourous event to Titanic Belfast in aid of NSPCC Northern Ireland

Belfast -based Debt Strategists, Bell & CompanyBelfast -based Debt Strategists, Bell & Company, are holding a casino inspired Gala Ball on Friday 3rd March at the award-winning Titanic Belfast and are delighted to have the fantastic support of some well-known names including special guests Lady Brenda McLaughlin and David Tait.

All guests and sponsors alike will be given the ‘Royale’ treatment with the evening beginning with a sparkling drinks reception at 6.45pm and a tantalizing 3 course banquet with Titanic Tea and White Star Line Coffee to follow.

Much loved local favourite, Pamela Ballantine will host the event in her usual exuberant style guaranteed to keep the crowd entertained. The Luxury Casino will be sure to bring out the ‘High Roller’ in you and will be available for all guests. The fun doesn’t stop there and there will be dancing until the early hours with the renowned ‘Just Adam Band’ along with other surprises on the night.

Earlier this year Bell & Company decided, by unanimous agreement, to select NSPCC NI as charity of the year. Too many have had their childhood robbed from them and endured life destroying experiences. Guest speaker David Tait will courageously speak at the event, which is guaranteed to touch everybody in the room.

The Fundraising Gala Ball is the most important fundraising event, to date, to generate vital funds to sustain the NSPCC’s work in Northern Ireland. Company Director, Terry Bell states, “Our goal is to raise £5,000 in our first year with the NSPCC. This is a cause that is very close to our hearts collectively as a team and we are working very hard to achieve this for such a worthwhile cause. We must thank all those involved, not least our sponsors and everyone attending. There are still a few tables left so why not join us for what will be a great night.”

From left to right- Erin Weatherstone Bell & Company, Fergal Maguire Cleaver Fulton Rankin, Pamela Ballantine, Amanda Bell Bell & Company, Clare Galbraith NSPCC NI, Phil Cowen NIBC, Helen McCarragher Bell & Company

The event has attracted much interest already with tables and tickets selling out fast. Some key sponsorship and support has been gratefully secured from well known, local businesses including Cleaver Fulton Rankin, NIBC, Fona Cab, Murdock Builders Merchants, WC Anthony & Sons, McAtamneys Family Butchers, Fluent Finance Abroad to name a few with further sponsorship welcomed.

The NSPCC NI are the leading children’s charity fighting to end child abuse in Northern Ireland. Almost 2,000 children in Northern Ireland were identified as needing protection from abuse last year and the NSPCC are fighting every day to prevent this.

“We’re the only charity fighting to end child abuse in the UK and Channel Islands. That’s why we help children who’ve been abused to rebuild their lives, we protect children at risk, and we find the best ways of preventing child abuse from ever happening”.

Tickets for the Gala Ball can be purchased individually at £60/pp and there are still some tables left including ‘High Roller’ and ‘House Tables’ – the perfect opportunity to have a work or family get together! All tickets include a sparkling drinks reception, 3 course gourmet dinner, full use of the luxury casino and live music from ‘The Just Adam Band’ and dancing until late.

Looking forward to the event, Company Director Amanda Bell said “We are delighted to be hosting this prestigious event in aid of the NSPCC Northern Ireland. The evening will be a lot of fun for everyone involved but crucially the money we raise enables us to help many more children across Northern Ireland suffering at the hands of child abuse.”

If you would like to buy tickets or a table for the event or would like to provide a prize for the raffle then please contact Bell & Company directly on 02895 217 373 or visit their website at http://bellcomp.co.uk/corporate-social-responsibility-nspcc/casino-royale-ball/

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