Mortgage Spanish
Spanish Property Purchases – Off Plan versus Resale and how to finance both
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Mortgage Spanish Spanish Property Purchases – Off Plan versus Resale and how to finance both |
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Below is a very useful article written by Mark Mountney, Managing Director of Rose Financial Services, who arrange Spanish Mortgages to buy property in Spain
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Buying in Spain "In recent weeks I have written with regard to the necessity of using a ‘process’ in buying in Spain. Even using tight parameters and a ‘must do’ list things can still be out of your hands. What springs to mind is the recent disclosure of the supposed 30,000 ‘illegal’ units in the Marbella area, apparently down to a crooked mayor and associates, even local Notaries. I mention the latter because, of all the various parties in a purchase transaction, being government representatives, they are the ones upon whom everyone’s trust falls. For Notaries to be found wanting is a real shock! I actually put that Marbella story down to being the exception rather than the rule. The press are the same worldwide; there is no story unless it has a dark side and, in not knowing the facts myself and relying on my own experience, I suspect it is far more of a ‘one off’ than has been reported. Yes, it reflects the weakness of the Spanish system, but, no, it is not the norm. What it does endorse though is the need for caution and sticking to the use of responsible and reliable entities that you have checked out. Referrals mean a lot in my book! And staying close to the ‘to do’ list! In this piece I would like to compare the processes of buying ‘off plan’ against the more straight forward resale or 2nd hand property. I actually think this is an important comparison to make as the same availability of off plan is not readily found in the UK, so there is not a great deal known generically about the process and, more to the point, the potential pitfalls that purchasers can come across. Too many purchasers commit to transactions based upon trust alone without knowing the questions to ask. Nothing wrong with trusting people; life itself rotates around such, but there is nothing like a bit of understanding and some detailed questions to cut to the heart of important issues. Another thing! Surely the financing of the purchase, whether it is a resale or off plan, is rather fundamental? I have no personal axe to grind here (albeit I can see why readers might think otherwise) but it really is critical to understand the many issues that impact on personal finances and wealth here in Spain. As I have said and written on countless occasions, this is NOT the UK; you must think differently and how can you do that unless you have the relevant knowledge on board. And a professional, highly qualified, experienced and legitimate Financial and Mortgage Advisor is the only entity that can deliver some of this information to you. So visit the finance before you do anything. We will tell you what to look out for, the process to follow, the costs attached and the many options available. We will tell what is tax effective and the way that the purchase should be structured. We will advise you of the impact of income tax, capital gains tax and inheritance tax and how these can, in some cases at least, be mitigated. We will give you the big picture, and not just a small part of it! That is our job after all! That is not a sales pitch; it is fact! Part 1 - Resale Properties I want to start with second hand, used or, as they are known in Spain, resale properties because these are relatively simple to understand. But more to the point, it is easier to ensure that you and your conveyancing solicitor spot any issues that could turn into problems early in the buying timetable of a resale. The tradition here is that, once you have identified a property you want to buy, a holding deposit of say Euros 3,000 is paid. This takes the property off the market but it would be wise to ensure that this is so and, more importantly, that if the seller cannot deliver the property for whatever reason, the deposit is refundable. Property ownership here is, like most places in the world, by title deed and the registration of such in the Land Registry. The deed is known as the ‘escritura’ and the Land Registry search, which your solicitor will check immediately, as the ‘Nota Simple’. It is very important for the estate agent or the vendor himself to deliver to your conveyancing solicitor (yes, you really do need to use one) a copy of the existing deed so that a Land Registry search can be undertaken. The latter takes hours only to obtain and what it will confirm is the following; 1) The registered owner of the property. This should, of course, agree with the deed that has been presented to you. 2) A description of the property. If there have been any material changes to the property (perhaps an extension or change of use) these must be registered. If not, are these changes illegal and are you assuming the vendors responsibility in buying it? 3) Any mortgages outstanding. These will have to be repaid before or at the completion of your purchase. 4) Any restrictions. There has been some concern of late about certain new builds locally that have had such a restriction placed upon them. This comes from the history of Almeria and the inability to prove title of the land. Many new registrations come with a 2 year window for a legitimate claim to be made. Perhaps not a major problem in itself but a potential issue nonetheless. I have to say here that, despite this part of the process supposedly being as automatic here as it is in the UK, it is not always so and I would stress that you really, really do need to ensure that the above is actioned on your behalf by a solicitor, preferably before a cent is paid over. It can be a quick action (a day or two) and the vendor really should have his deeds available for checking. If not, why not? Remember that without the deed being in his name and duly and accurately registered, how can he sell it cleanly to you? If you acquire bad title, can you subsequently clean it up? How long will that take and at what cost? Can you sell the property on if you fail? Another point. Banks expect title to be clean for mortgage lending. As mortgages are even more important for ex pats buying in Spain than for UK purchases (another issue in it’s own right!), this is another reason why the initial legal and paperwork checks are so, so important. In far too many instances for my liking, Rose FS are caught up in messy transactions that should never have occurred. That is why we like to be involved on Day 1 and not after a property has been located. We need to give the ‘heads up’ as it were! Assuming that all paperwork is clean and we can push on with the purchase and, advisably, the mortgage funding, what is the achievable timetable? Arguably, we only need say 4 weeks to seek and secure the right mortgage funding for you. And this timetable applies whether capital needs to be released from your property in the UK or not. And then the legal work will take much the same timeframe, so an agreed timetable of 4 – 6 weeks is normally achievable. That is actually quite quick. Once the conveyancing solicitor has satisfied themselves that title is good and that there are no glaring problems, they will draw up, in conjunction with the vendors own solicitor, a Purchase/Sale Contract, known here as a ‘Compraventa’. That document will be much like the UK equivalent. Now a point I need to make here is that with the majority of contracts that we see, funds are delivered in 3 parts; the initial holding, a 10% deposit in several weeks time and the balance on completion. If we truly can adhere to a 4 week programme, I strongly suggest that you push hard to bypass the 10% deposit and go straight for full legal completion. Why? Because too many issues can arise with any purchase and I simply do not like my clients paying a cent more than they really need to. A 4 week timetable is fast! Hold your position and just focus on the completion. The property is off the market as you have paid the initial; holding deposit. A further 10% will give you no greater peace of mind and no extra security; issues can still arise and you do not want to be 10% out of pocket! At Rose FS, we deal with many solicitors on behalf of our clients but, like anyone, we have a few that we prefer to recommend. Why? Simply because we like their ‘bulldog’ approach! That doesn’t mean they are English. No, they are Spanish and English speaking. We like a conveyancer to be really tough on behalf of our clients. That translates into not being bullied into movement unless it is right for you, and to not allow you to pay a cent more than you need to, and only when they confirm it is right to do so. These people are life experienced here; they have seen it all, know all the little games that people play and can identify a problem fast. A good conveyancing solicitor, always suitably qualified, is an absolute must and right at the top of the ‘must do’ list. So there we are! That is a very brief and simple guide to getting the purchase of a ‘resale’ property as right for you as is possible. Next time I will cover off the more complex ‘off plan’ purchase." click here for the next article in this series Mark Mountney is a partner in Rose Financial Services, a specialist mortgage brokerage and regulated Independent Financial Advisor based in the Parque Comercial, Mojacar. He is a fully qualified mortgage and financial adviser in the UK with some 10 years experience in managing his own firm. Mark was also a founder of The Association of Mortgage Intermediaries, the trade association for mortgage advisers with 20,000 members.
A Spanish property mortgage is as straightforward a process is as in the
UK. A number of documents must be furnished to the Spanish bank in order to
accommodate a smooth transaction. |
Spanish Mortgage and Spanish Property
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