Shop around for the best mortgage
If you are looking for a property investment in Spain and you need finance, shopping around for mortgages is almost the first thing you should do. With ample planning, you are less likely to end up with high rates and inflexible conditions, and this decision will have an impact throughout the life of your property so this is something to get right from the very start.
The best way to make sure you are not going to overspend on your investment in Spanish property, is to make sure that the mortgage is signed off on the best terms for you.
There are other factors during this process which can limit the spend, so in this post we’ll give you some of the best practices to both save money and get the best value on your property in Spain.
There are inflexible fees such as the AjD, which is a property tax paid directly to the Spanish government, this is a percentage of the mortgage and is calculated as such. Also the valuation of a property is carried out by the lender via a pre-selected property surveyor, costing around a thousand euros, and this fluctuates depending on the value of the property.
With interest rates forecast to rise ever so slightly as the Spanish housing economy solidifies, interest rates will not be a huge factor until at least beyond 2020. On a variable rate loan, you will see a maximum of 2.5% from the lender, so with the interest rate currently low, the payments are still manageable. Be prepared for the first ten years of the mortgage to see little capital payment, as it is towards the end of the mortgage duration that the balance shifts towards capital payments rather than interest.
Choosing a lender with a reasonable opening fee is a good place to start. Some of the best-known lenders will charge around 2% of the mortgage as an opening fee, this can result in a payment of €4000 on a €200,000 home, whereas finding a trustworthy lender for a smaller fee is relatively easy and can save you over a huge amount from the very start.
A notary has to sign off if any property has existing debt against it. Their fees are based on the number of clauses a mortgage contains and with the right advice you can find Notaries who will charge less for their services. Try to make contact with locals in the area or hire a local property consultant to help you.
Interest-only mortgages are still uncommon in Spain but do exist. There is good opportunity here to pay a low monthly mortgage fee, and with the forecast for a resurgence in the housing marketing in Spain (we are seeing green shoots right now), the equity on your property after five years is likely (though not guaranteed) to be between 50% and 100%. If you are looking for a property investment in Spain this is a worthwhile consideration.
Refurbish your property investment in Spain
There is a lot of risk on an investment like this. And a lot of your expenditure will go on consultancy, but done right this can be a great investment, giving you a quality property for a lower budget. Don’t cut corners. Make sure you have a local consultant with experience and a portfolio of mid-to-high range providers in both the legal and construction sectors. Again, with property in Spain at such a low level, you can pick up a great property for under €50,000 and spend the same in refurbishment.
Get better insurance – take time before making the choice
It is a legal requirement to have home and contents insurance, get some advice on this are there is also a requirement to have the lender as the beneficiary of the insurance. The level of insurance you need to buy is set against the value of the property. Also, thought the market is forecast to grow, there are some clouds over Spain and Europe that could result in an unexpected recession, so mortgage insurance is also worth looking into to mitigate against any unforeseen circumstances in the economy.
Take your time, work through things without haste and be thorough. And if you need any advice contact Blue Key. Blue Key is your one stop solution provider for a property investment in Spain, especially in Valencia.