Securing Spanish Mortgages after Brexit

Spanish Mortgages after Brexit

What impact will Brexit have on securing mortgages for those who are non-Spanish residents? 

Fluent Finance Abroad answers this and other related questions…

With just a matter of weeks to go, and with the date of the 31st December 2020 looming ever closer, the transition period of the UK leaving the EU will end, and BREXIT will be completed, although currently, the exact terms are still very much under debate and discussion.

Although the indications are that nothing much will change regarding securing a Spanish mortgage, there is no doubt that things will be very different.  So what are the potential changes?

Our specialists at Fluent Finance Abroad will answer some of the questions we´re most frequently asked regarding mortgages, resident and non-resident implications and general property related issues post-Brexit. 

Will I still be able to get a Spanish mortgage after Brexit?

As a non-resident and providing you have proof of income and solid credit history, you will be able to secure a mortgage for the purchase of a property in Spain post-Brexit.  From our conversations with many Spanish banks we are led to believe that nothing very much will alter, however, the criteria is beginning to tighten in some areas already regarding lending, and we at Fluent Finance Abroad envisage many more changes to come.

For example, some banks are already restricting lending to 60% LTV as a maximum for UK associated clients.  Others are being a little more generous. Fundamentally, it depends on the internal evaluations of the new lending risk which is presented by BREXIT and accepting mortgage applicants from the UK. Lending risk is under constant review within the banks, and within these reviews the banks appetite for accepting risk is accordingly modified and managed.  So, while it might appear that not much will change, what does change can have a profound effect when trying to get approved for a mortgage.

As a fully qualified whole of market broker Fluent Finance Abroad is constantly responding and adapting to these market changes and is ideally placed to help you avoid any pitfalls and navigate the complicated Spanish mortgage market.  We are here to guide our clients along the right path so as to secure a successful lending outcome.

 

So, if I want to take out a mortgage what type of consumer protection is in place to prevent me from being mis-sold an unsuitable mortgage product?

We have been asked this question many times. With the introduction of the Mortgage Credit Directive (MCD) adopted by the European Commission in February 2014, this in essence was designed to prevent irresponsible lending and borrowing behaviour within the EU, and thereby potentially protect anyone wanting to secure a mortgage.

As you can appreciate, this is an EU directive so while the UK may continue to observe and comply with the European system, inevitably over a period of time differences will appear between the two systems. So, post BREXIT and over the longer term things will begin to differ, and confusion and misinterpretation of consumer rights for UK clients buying could become an issue.

And that is why you need to use our highly skilled consultants at Fluent Finance Abroad.  We are fully qualified and regulated by the Bank of Spain under ley de creditos inmobilarios LCCI 5/2019 with our Bank of Spain registered company number of D305.  We are fully authorised and comply with all of the rules and regulations that govern consumer protection.  This may not sound particularly important, however, this is absolutely critical when it comes to ensuring your safety and security when obtaining a mortgage in Spain.

At Fluent Finance Abroad, we form a bridge of communication and understanding between our clients and lenders as we´re fully up to speed with legislation, consumer rights and mortgage regulation.  We use our extensive professional knowledge to guide and protect our clients to ensure they avoid making any wrong decisions.

Our advice is never to try to obtain a mortgage with an organisation that isn’t regulated. 

I already have my Spanish residency so how much can I borrow and are there different qualifying criteria?

If you have Spanish residency and you pay taxes in Spain, the general rule is that you will be able to borrow up to 80% of loan to value of the property. This is the standard for most Spanish lenders, but there are occasions where you may be able to borrow slightly more than the standard 80%. If this is of interest then please get in touch so we can assess your individual situation and see if this would be possible.

Rates are better as a Spanish resident than they are for non-resident lending. For example, the best deal we have been able obtain recently has been a variable rate mortgage with a spread above EURIBOR of 1 point (Euribor plus 1).

Fixed rates are still very attractive for many clients,  and we currently have a 20 year fixed rate deal of 1.79% available, as long as you take out the lenders life insurance & home insurance.

To qualify as a Spanish resident for lending purposes, you will usually have to prove that you have been declaring your income in Spain for a minimum of 2 to 3 years, depending on the lender.  However, there are some lenders who would consider a shorter period, but you would need to be a Spanish tax payer in all circumstances.

If you need help or clarification of any of the issues raised regarding lending with Spanish residency please contact us at Fluent Finance Abroad and we will be happy to answer any of your queries. 

Once I purchase the property will I still be able to rent it out post Brexit?

Yes, you will be able to rent the property out in the same way as pre-Brexit.  In line with the regulations put in place in May 2016, when you advertise your home as tourist accommodation it is mandatory to register your property with the Registro de Turismo in your area.  This is a simple process that can be completed online.  For long-term rentals no registration is required. 

Will I have to pay more taxes on the rental income from my property?

As we currently understand it from January 1st 2021 there will be a slight rise in taxation on rental income for UK owners, which falls in line with the tax paid by all non EU citizens, which is currently levied at 24%. 

How long will I be able to stay in my Spanish property as a non EU resident?

As of today, there are no clear rules set out regarding the length of time a British citizen can stay at their property in Spain post Brexit.  Under the current rules for non EU individuals you have the ability to stay within Spain and the Schengen area for a maximum of 90 days within a 180 day period without having to obtain a visa.  For those wanting to stay longer than 90 days this is currently an issue for discussion with the authorities regarding extended stay permits, but as of now we have no further information.  As soon as we do, we´ll let you know.

If however, you invest in property in excess of 500,000 euros you will then qualify for a non-EU citizen Golden Visa which allows multiple entries to Spain for the whole family,  although certain conditions will apply.  Another advantage of the Golden Visa is the option to only visit Spain once a year if you wish but still retain the Golden Visa.  This Visa needs to be renewed every two years.  Our experts at Fluent Finance Abroad will explain the rules and regulations to you if this is something you would wish to consider.

Can I get my Spanish Residencia if I buy a property before December 31st 2020?

Under the withdrawal agreement, all British citizens who register for residency in Spain before 31st December have the right to live in the country with the same rights as EU citizens. In July the Spanish government brought in a new residency card for British applicants called the TIE, the Tarjeta de Identidad de Extranjero, a biometric residence card which will prove your rights under the Withdrawal Agreement.

You will need to prove that you are planning to be in Spain for the long term and have a copy of the title deeds to your property, or a long term rental contract.  However there are a number of criteria that you have to meet regarding income, healthcare provision, bank funds etc. which of course depends on the circumstances of each individual applicant before you can secure this card.

If you wish to apply for a Spanish residencia after 31st December we envisage that there will be different immigration procedures to follow, however the details and clarifications are unknown at this stage.  We will update this section once we have further information.

At Fluent Finance Abroad, we can assist you on the first steps regarding your residency and introduce you to our professional associates who specialise in securing residencies. For further information on any of the issues raised contact us on +34 952 85 36 47 or get in touch via info@fluentfinanceabroad.com.

What is the Spanish mortgage ACTA?

spanish mortgage acta

The ACTA is an official document that stays in your mortgage file that the Spanish notary has to ensure you sign and states that you understand how your chosen mortgage actually works. They will ask you a series of questions regarding interest rates, be it fixed or variable, early cancelation commissions, and your rights and obligations as a consumer regarding Spanish mortgages and the laws that regulate such contracts.

You can take this opportunity to ask questions to the notary if there is anything you are unclear about but this is your final opportunity to clarify anything relating to your agreement or Spanish mortgage rates.

The Fluent Finance Abroad team will of course help you with translating and understanding everything before you go to the notary, who will also check to see that you have received the required documents from the lender prior to signing the ACTA FEIN & FiAE. We will ensure you get these too.

The important things here are your rights if it comes to repossession. If you did find yourself in difficulty, you have at least 12 months before the bank can put any pressure on your regarding them taking possession of your property.

What can I be charged above my agreed interest rate? And what are the early cancellation fees?

You can only be charged a default interest of 3 points above your agreed spread and no more. Meanwhile, a 2% early cancelation fee is the maximum a bank in Spain can charge you for early redemption of the fixed-rate mortgage, no more. It is less for variable rate Spanish mortgages.

What is ACTA?

The ACTA is a legal document that forms part of the application process to ensure that you, the client, fully understands what your Spanish mortgage is designed to do. It was brought in to ensure that the general public are aware of the financial consequences they are getting involved in so that firstly consumers don’t enter into anything they are not comfortable with or that they do not understand and also to ensure that there are no legal comebacks for the bank if their client fails to repay the mortgage.

All of this comes down to the fact that Spanish banks mis-sold mortgages prior to the credit crisis and when the financial crash happened in 2008 and 2009. The recession brought all of these bad practices out into the open so it became clear that the relationship between Bank professionals and the public was too one-sided and unfair. Regulation, in the form of the ACTA, was then brought in to prevent anything similar regarding mortgages happening again.

The documents for the notary to prepare the ACTA has to be sent by the bank and that is when the 10-day rule has to apply. These documents must be the final contracts that you are supposed to sign and cannot be changed by the bank at any time once they have been sent. If they did, the notary would just cancel the signing and get the bank to reissue the contracts and we would have the start the 10-day period once more.

Contact Us

We will assist you with understanding your mortgage application from the very beginning meaning that signing the ACTA will not be a stressful situation for you to go through. For more information contact us on +34 952 85 36 47 or get in touch via info@fluentfinanceabroad.com.

On Stranger Tides

Fluent Finance Abroad was set up by Marc Elliott back in 2006. That was two years before the hit of financial crisis and resulting credit crunch that adversely affected the Spanish property market. Whist many other financial entities sank without a trace, FFA successfully navigated our business, our partners and our clients through that financial storm. We gained a great deal of unique knowledge along the way. Now, 14 years on, we find ourselves entering into an uncertain period once again. This time the Coronavirus epidemic is the catalyst for the tsunami which will wreak havoc across the lending markets and wider economy. While the causes of financial turmoil differ, the fallout, and how best to pilot your way through is a skill which can be learnt. As one of the longest-serving specialist mortgage consultancies in Spain, we use the benefit of experience gained by prevailing through previous trials and tribulations to act as a beacon for our clients guiding them so they do not have to put their purchase plans on hold and can still realise their Spanish property dreams. Read More

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