Mortgage for €1.15million property in luxury Spanish development

THE SCENARIO

Are you looking for a mortgage in Spain? The Spanish property market is very popular at present; the team at Enness have received an increasing number of enquiries for purchases in Spain, with many of these being for luxury new build properties. I recently received an enquiry from a European client who was a UK tax resident. This client was looking to buy an off-plan purchase in a new luxury development, alongside a newly built golf course.

The construction was due to complete early next year, and would be a contemporary structure. He was looking for a €1million+ loan to buy this property, which would be a beautiful long-term asset in which he could enjoy his retirement.

However, he was encountering several problems in his search for an appropriate mortgage. For one, his income was structured in an unusual way. His income was run through a limited company, and had been sporadic across the last three years; lenders will generally look for consistent income to calculate a client’s affordability. His wife, who was also a European national, was unemployed.

Secondary to this, both the unique design of the property and the fact it was the first to complete on the development made it hard to value effectively, which has a knock-on effect on how much the Spanish bank would be willing to lend against it. Spain is notorious for having conservative valuations; they don’t want any single area to particularly outpace other areas.

Finally, Spanish banks typically take a conservative attitude towards debt-to-income ratios, meaning they are often reticent to offer a mortgage in Spain to those who already have large outstanding mortgages; my client already had a mortgage in the UK.

OUR SOLUTION

Fortunately, I was about to use our lender network to find a solution. By spending time with this client to understand his background, I understood he had significant amounts of liquidity in the background, so his low income was a surmountable obstacle. The bank I chose allowed us to offset the mortgage debt the client had because his current mortgage term was going to end before the new mortgage debt started.

The final product secured was for 70% loan to value (LTV), for total borrowing of €1.15million. This would be on a capital repayment basis, as interest-only mortgages do not really exist as a product amongst Spanish banks. The rate for this was 2% fixed for 20 years, although after deductions, this ended up being closer to 1.55% which was a fantastic result.

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