In this article we will be covering Mortgage Valuations in Spain.
Appointed valuation companies help Spanish lenders to evaluate the value of a property before extending a mortgage. So, mortgage valuation comes first before financing. The company will require the person applying the mortgage to pay a certain amount. The costs range from hundreds to a thousand Euros, according to how much the property is valued.
Spanish mortgage lenders also require that you provide evidence of land registry filling (nota simple) before granting a property loan. The land registry filing document shows that there are no other debts on the property. Then, you, or your lawyer, will also ask the land registry for nota simple. So even if not with a Spanish mortgage, this filing will be your non-differential cost to settle.
The practice among the Spanish mortgage lenders is to charge a fixed price to set up a mortgage. Usually, the fee is 1% of the cost of the funding requested. However, the range is from 0.5% to 2%, according to the lender.
When you arrange a Spanish mortgage, you have three categories of insurance options. General house and contents insurance is the first that is legally required by Spanish mortgages with the lender as the beneficiary of the house insurance.
So the company will cut out the level and costs of insurance depending on the value of the property. It’s also required that the cost of insurance be different from the value of the property. The insurance covers the costs of repair and general maintenance of the house. So even if the property needed renovation, it wouldn’t include the cost of the existing land.
Then life insurance and mortgage insurance are the two other types of insurance. These two are not made necessary, but worth considering as good insurance cover. Besides, it gives you an edge when you negotiate better conditions for your Spanish mortgage. In these insurance options, your age determines the costs of insurance and different banks provide various values of loans. But, on the average though, these insurance costs are lower compared to that of the UK.
If a mortgage has been secured over a Spanish property, a Notary has to be noted. After the declaration before a notary, the number of clauses in the deeds will determine the notary fees. And generally, the number of terms in a purchase deed will be equivalent to that of a mortgage deed. The notary costs will cover these deeds, and be determined after the public deeds of sale is signed.
When there’s a mortgage on Spanish property, such a mortgage must go through the registration with the land registry. The lease is considered debt on the property. So the land registry fees in Spain might be slightly costlier when you want to buy properties. Generally speaking, the registration fee for a Spanish mortgage is approximately equal to the registration fee of the property.
This stamp duty is a tax paid on the real value, not the apparent value of new mortgages. Before, it was taxed on people who borrow. But a law change has made it for lenders since the 12th of November, 2018. So, it’s of business sense for lenders to add higher interest rates, as well as related fees. The amount of tax paid differs from region to region.
There are companies (gestoria) whose duty is to arrange for the correct inscription of the deeds in the local land registry. The deed arrangement fee is the cost paid to these companies. Typically, lenders would insist that they choose the gestoria that registers their property mortgage. So doing, they can oversee the registration process themselves, costing around some hundred Euros.
It is usually a “bad” business for Spanish Mortgage lenders when clients cancel mortgage too early. Perhaps they found a better option and abandoned the former for the latter. So, to play safe, these lenders include early cancellation costs, usually around 1% of the original mortgage value. However, with a good broker, you can still find a Spanish mortgage program with no cancellation fee. This system is much profitable for lenders, unlike for clients who prefer mortgage services without the early cancellation fee. For them, it becomes even more flexible.
Sometimes, when clients pay off part of their mortgage early, mortgage lenders in Spain penalize them. Partial mortgage cancellation usually comes with a financial penalty. And it is related to the amount of money the clients pay back early.
Spanish propertied secured with mortgages can be sold off to a new owner. In such cases, the mortgage can be canceled or transferred to the new owner. This subrogation process attracts a fee, which, generally, is less than the cost of opening a new mortgage. The subrogation fee is covered by a new owner.
You might be given an offer to subrogate a Spanish mortgage. Then, you should keep these two tips in mind. Firstly, if you subrogate a Spanish mortgage, it means you would have to continue covering the existing mortgage. So, the existing requirements and conditions like interest rates and period will change. The disadvantage of this system comes in when the terms of the existing mortgage are not favorable. This problem is one you might have with the Spanish Mortgage Market. Secondly, you will get the advantage of paying lower fees for the set-up costs, including taxes, Notary, and land registry.
A Spanish mortgage comprises of monthly repayments comprising of both capital repayments and loan interests in par payments. You wouldn’t pay interest on loan if your mortgage is inters-only, and it is quite rare in Spain. When you start paying off the mortgage, the highest costs will be the interest payments. Nut eventually, when you settle the principal loan, the interests on it will reduce drastically. The calculation of interest payments is a function of the base rate that the European Central Bank (Euribor) set. For some Spanish mortgages, the first period has a fixed rate, before moving to Euribor +x%. The lender’s margin on the loan, +x%, varies between clients and lenders. But generally speaking, Spanish mortgage lenders charge between 0.75% and 2.5% for variable rate loans.
On standard Spanish mortgages, the capital repayments are monthly fees, whose costs are cut according to the duration of a loan. A longer period of repayment translates to lower monthly charges. If your mortgage is interest-only, you won’t pay the capital until a long while, maybe 5-10 years, or when you pay off the mortgage. This system provides the benefits of low short-term monthly repayments of mortgages. You wouldn’t be paying the principal, but you would still need to return the entire capital when due.