Spanish Mortgages - New Mortgage products that really can save your (financial) life!

That was pretty much the newspaper headline of an article I wrote some calendar months ago but, following my remarks in the Property Post’s last edition, I thought I would spread out upon the subject of ‘5 Reasons why you need a Spanish mortgage’ and present some new mortgage merchandises that are here already or owed for at hand release.

There are three generalised ‘needs’ that we at Rose degree Fahrenheits place in a good number of our clients;

1) To access some of the capital locked in their homes to be utilised a) to better the property and b) to better their lifestyle owed to deficiency of income

2) To purchase a property (perhaps their first here in Spain) but without the normal ‘provable’ income that lenders need to see

3) To guarantee the safety of their capital, probably mainly in their homes, and continue such as for themselves and their children in inheritance

I could generalise additional and place that the age of the average applier is much aged than we would have got got seen in the United Kingdom and certainly so for the first and last of the three social classes I have mentioned above. For the second category, the age could range from 30 to 60 but also differ in that we see firstt clip buyers with small capital or the inability to demo earned income versus the far more than than sophisticated investor, probably with more than one property here already, looking to trust on ‘rental income’ rather than the traditional need for ‘earned income’.

The above all translates in bend to three basic mortgage merchandise types to turn to these client driven ‘needs’. That are not so numbered to ran into the countries I have got raised individually; there is a certain overlap of benefit that lawsuits more than one client type.

1) Long term ‘Interest Only’ mortgages. I emphasize long term because we have got a range of shorter terms (2 to 10 years) that lawsuit most eventualities. So that beingness so, why make I need anything longer?

There are numerous needs and benefits that tin be defeat by such as a product:
• Where capital, normally £, where income that tin be generated from investment that tin easily transcend the Euro interest collectible on the mortgage. In other words, after paying the debt service, an added benefit. • Where the purpose at the beginning is to do a capital addition i.e. to sell the property in the future. This makes not associate to the client who is retiring here and normally lawsuits the outlook of the property investor. Having said I will now belie myself and state that the ‘retiree’ should see using long term ‘interest only’ for the following reason. • Inheritance Tax (IHT). Not to be taken lightly. To not only take a mortgage where possible, even though capital may be to pass over out the necessity. By having a mortgage, the free equity in the property is reduced which can, in turn, eliminate any exposure to IHT which, here in Spain, uses at much, much lower degrees than in the UK. Many property purchasers are simply unaware of their exposure here which tin mitigated so, so easily and the usage of a long term ‘interest only’ mortgage is one route.

At Rose FS, we are acute to force lenders to turn to our clients’ requirements, and I am pleased to state that, not only make we have got a merchandise that can offer up to 25 old age ‘interest only’ but other lenders are working with us to seek to come up up with their ain solutions. I surmise that in a relatively short time, we will see a ‘sea change’ against what we have got now versus a whole new capableness to present a full solution which is not restricted to any degree. Read that as calendar months and not years.

2) Equity Release mortgages. Now I have got to vitamin E careful here and explicate that I make not necessarily mention to the more than sophisticated mortgage/investment back-to-back arrangements that are on offer. These are attractive to some clients in that they can accomplish the desired end of mitigating IHT and even supply a ‘free’ income over and above paying the mortgage debt service, but great cautiousness is needed in apprehension the product. They can work well but they are not the be all and end all to all clients.

The term ‘equity release’ covers the general need to make just that, release some of the equity in the home. In the UK, the ability to accomplish this for the elderly, with limited income or other capital on which to live, gave rise to a merchandise that needed no provable income and where interest collectible on the borrowing was ‘rolled up’ and added to the mortgage debt. Ideal for certain clients where capital is needed.and where there is no existent ability to pay a debt service monthly i.e. low income probably pension orientated. These have got been re-categorised by the FSA, the regulator in the UK, as ‘Lifetime mortgages’.

Now the equivalent of this product, where no cogent evidence of income needs to be seen by the lender, makes not be here in Kingdom Of Spain except in the word form of the IHT extenuation ‘equity release’ strategies that I mentioned above. No. Iodine mention to a merchandise that makes not affect the compulsory investing of the capital to ran into any debt service, where the capital can be taken in the word form of a mortgage and debt service is either involute up or deferred, probably for the eventual donees under a Volition to take on.

These merchandises are on the planning tabular array and I would trust to be able to have got these available in a few calendar months only.

3) Self Certification of income. That simply intends there is no need to turn out an income as lenders normally would require. The lenders in the United Kingdom are experts at assessing hazard by categorising market ‘niches’ and self enfranchisement merchandises were developed old age ago to ran into client needs. They, the lenders, effectively take a gamble that clients will not default on and the hazard can be controlled by limiting the percentage of the property value they impart against an expected rise property market. The merchandise have been largely responsible for the formidable property terms rises over the last 10 old age or so.

Now, again, no ‘real’ self enfranchisement merchandise bes here. Some would have got you believe otherwise but generally lenders will take a position cases by case. If a client only desires to borrow 30% of the property value, the hazard to the lender is clearly that much lower than a client that desires to borrow 80%. But lenders are not in the business of repossessing property to get their money back! They impart simply to make a bend on the interest, so they need to be certain that the secondary hazard i.e. the percentage of the value they lend, is assured.

But, if these ‘self cert’ merchandises as phone call them do not yet exist, is there a manner around the problem and the inability to turn out income? The reply is yes!

Many aged clients retire to Kingdom Of Spain capital rich and income poor. And, when wanting to borrow money for whatever purpose, the age and income can be a clipper in the eyes of a lender. This is because ‘affordability’ is calculated using a normal Repayment (capital and interest) mortgage rather than ‘interest only’. So, to defeat the problem, we utilize brothers, sisters, children or even parents who make have got provable income to move as a ‘guarantor’. Normally it is the children that enactment in this capacity and, frankly, if they desire the benefit of the heritage when the parents go through on, I personally make not believe this is a batch to ask! At the end of the day, with the parents (the chief applicants) only having to pay ‘interest only’ the opportunity of the sureties being called upon is distant to state the least.

But there is often the matter of pridefulness and the reluctance to name upon anyone to stand up on the shoulder of the applier in financial support. So then we need a ‘pure’ self enfranchisement mortgage to fill up this niche in the market. Watch this space!