Remortgaging in Spain
In the past looking for a better deal on your current Spanish mortgage was not a viable option. Most of the banks were not keen to consider it.
In most cases, the cost of the mortgage deed tax, that was required to be paid on the new mortgage made it a worthless exercise. Any gain that you would make on an improved interest rate was negated by the level of mortgage deed tax due to be paid.
This changed in June 2019 when Spanish law regarding mortgage contracts was implemented, meaning that all costs relating to the mortgage were now to be paid for by the bank, not the client. This is excellent news especially for those clients, who took out mortgages between 2010 and 2015 when the margin on a variable rate was around 3 or 4% above EURIBOR, as they can now look for an improved deal at very little cost.
These days the Spanish banks have realised that offering remortgages for clients is good business. There is a reduced risk in lending to existing Spanish mortgage holders, who have a proven track record of making their monthly mortgage repayments religiously, rather than taking on new borrowers with no past performance. Therefore, they are keen to offer remortgage products to existing clients.
It is important to point out that remortgaging does not mean that existing borrowers can increase their existing loan amount.
Banks in Spain are still not keen on equity release and will only do it in very specific cases where it involves home improvements on the Spanish property. Typically they will lend up to a maximum of 60% LTV. The good thing is that the client only needs to cover the cost of the valuation of the property, the banks will also consider adding any subrogation fees to the loan amount.
Case study – One of our clients recently completed a remortgage. They were paying 3.5% fixed on their mortgage, which was taken out several years ago when interest rates were higher. The client was happy to go onto a variable rate deal and the bank arranged an interest rate of 1.5% fixed for the first 12 months thereafter EURIBOR + 1.15 for the remaining ten year term of the mortgage. There were no costs associated with the new mortgage – no arrangement fee, nor cost for valuation as the bank accepted the old valuation which was done at the outset of the mortgage. The client had to pay an early redemption cost of 0.25% of the loan amount to the old bank and the new bank allowed him to add the cost of this to the new mortgage. Best of all, the client was paying for obligatory life insurance with the first mortgage deal, which he was able to cancel as the new mortgage had no compulsory associated life insurance so needless to say our client was delighted with the new arrangement.
If you do have an existing Spanish mortgage which you feel is no longer competitive, speak to us and we will introduce you to an independent mortgage broker who will offer a free mortgage review to see how you can improve on your existing deal and save you money in the long term.