Spanish Bridge Loans

The principles of Spanish bridging loans at the level of the lender and how the financing mechanism works are similar to what you’d see for a UK bridging loan. That said, Spanish laws and regulations can differ significantly from what you’d find in your country of residence (whether in the UK or abroad). Property transactions, taxation, liabilities, regulations and ownership laws can also be different than you may be familiar with, so understanding how this type of finance works in Spain and how it will work with your plans and Spanish property ownership is vital.

Bridging loans are a type of short-term finance secured against commercial or residential property in Spain. They can be ultra-short-term – lasting just a few weeks and last up to around three years at maximum. Bridging finance is known for being exceptionally flexible and you can use them in various scenarios:

• To complete a Spanish property purchase quickly
• As an alternative to a mortgage or other property finance
• To complete a transaction before you are liable to lose a deposit
• To buy property outside of Spain using Spanish real estate as collateral
• Release equity against a home, residence or property you own in Spain
• To create liquidity quickly

A bridging loan will not be the right option in every circumstance. This type of finance is best used to achieve a specific outcome when there is a definable reason for doing so. That could be because you need to complete a Spanish property transaction quickly or release equity against a property you own in Spain to create liquidity. A solid exit (how you will repay the loan) and a plan for managing the money you borrow will be critical for lenders.

A bridge loan is almost always more expensive than a long-term mortgage or conventional property finance package because it’s a more flexible financing vehicle that allows you to use loan capital in various ways to achieve broad outcomes. A lender will need comprehensive technical skills to underwrite and execute Spanish bridging loans. That said, rates will be competitive considering what you want to accomplish. Sometimes, bridging will be your only option for raising finance, and you may be happy to pay a slightly higher rate to access capital. Very plain vanilla Spanish bridging loans will always be less costly than more complex transactions, but whatever your scenario, Enness will be able to secure competitive deals for you.

What a lender will offer for a bridging loan in Spain will depend on your requirements, property, plans, and exit. Some lenders can offer up to about 60 or 65% as a maximum LTV; others will offer less.

International bridging finance tends to be more challenging to deliver than domestic (UK) bridging finance, but don’t overthink things on behalf of your lender. The players that offer this type of finance can structure Spanish bridging loans to meet your requirements, and most can cater to things like corporate ownership structures and borrowers who are not resident in Spain. Whatever your scenario, Enness will be able to approach the lenders offering Spanish bridging finance and secure as much finance as possible at the best rates.

Bridging finance has been popular for some time in the UK but less so internationally. However, as more UK and international borrowers have bought property in Spain, they have created significant demand for bridging finance.

International bridging remains a relatively niche part of the market, but several lenders now operate in the space. These lenders tend to have extensive experience in global property markets and working with individuals who own property in Spain and structure wealth, assets and property through international structures.

If you need a Spanish bridging loan, you will almost be best served by a bespoke loan that is negotiated and tailored for you rather than a packaged product. Enness will source the lenders that can offer a Spanish bridging loan and negotiate this to ensure it meets all your requirements. This will include maximising what you can borrow and negotiating the best rates. Your broker will continue to work with you at every stage of the deal to ensure that the loan moves forward quickly to completion, and you can draw down funds as promptly as possible.

Spanish bridging loan providers are usually very specialist lenders who, by default, have technical expertise in international lending. As a result, they can typically deliver loans in Spanish bridging deals that include structures and corporate entities either in Spain or elsewhere.

There are many reasons why you may want a Spanish bridging loan. Sometimes it will be because you want to buy a Spanish property quickly. In other cases, you may wish to release equity from property you own in Spain.

Speed

Whatever your reasoning, one of the advantages of Spanish bridging loans is that they can be completed quickly, and you can draw down funds very fast – often in just a few weeks. Some lenders can complete deals in under two weeks, even in international transactions.

Bridging loans are much faster than mortgages. Many borrowers consider Spanish bridging loans because they can move ahead to buy property quickly before refinancing via an international mortgage, which is usually a time-consuming process as mainstream lenders move comparatively slowly as they look to underwrite risk.  

Bridging lenders of any kind, including those who offer Spanish bridging loans, are built to move quickly. They make lending decisions fast and will often be able to move things forwards per your timeframe to ensure you can draw down funds in the minimum timeframe.

Flexibility

Bridging finance is one of the most flexible ways to borrow, and these loans can be used in many different ways. For example, you can only use something like a mortgage for one reason (i.e., to buy real estate), but bridging loans and bridging lenders can offer finance for more diverse reasons and uses.

Amongst others, a Spanish bridging loan will be secured against a Spanish property and can be used to:

• Buy real estate (in Spain or abroad)
• Create capital quickly
• Consolidate debt
• Invest in securities, stocks, shares, bonds or a business
• Buy other assets

While bridging finance is flexible, it is not unlimited in its uses – you can’t approach a lender for a loan without having a fixed idea of what you want to do and why you want this type of finance. This is especially important in international bridging deals where the loan capital will be deployed outside Spain, despite being secured against Spanish property. Lenders are open to seeing loan capital used quite broadly, but you will need to have a defined plan of action that will detail how you will manage the funds, what you will do with them, and – most importantly – how you will pay the loan back.

Large Spanish Bridging Loans

Both large and small bridging loans are a possibility. It is possible to access large Spanish bridging loans of €1-€5 million. Some lenders can write larger loans.​​​

Price

Any international bridging loan will be more costly than a domestic UK bridging loan. Lenders need more technical skills to deliver this type of loan, and more work will go into underwriting and executing the deal. A lender will effectively charge a premium for this work, expertise and ability. 

While Spanish bridging can be comparatively more expensive than other types of loans, it is worth considering when and how you will use this type of finance. Bridging finance is only ever used when you want to achieve a specific outcome or create capital to do something.

Spanish bridging finance can effectively open doors for you, allowing you to release equity, buy property and solve problems – often incredibly quickly. You should always consider cost, but in many cases, its relative expense is well worth it. 

Fees

As well as the cost of the loan, you will also be liable to pay additional fees – these will include legal fees, lender fees, valuations, arrangement fees and other costs. In some cases, you may also need to consult tax consultants and other experts, depending on the elements of the loan and what it entails. Enness will provide you with information on all the fees applicable for a Spanish bridging loan, so you will understand what this finance costs and have an idea of what you will need to pay. 

Risk

As with any secured loan, you stand to lose your property if you can’t keep up with your repayment schedule. Having a secure plan for managing funds and detailing how you will pay back a Spanish bridging loan is imperative.

Bridging loans can be used as a quick way to release equity from unencumbered property you own in Spain. Here, the lender will secure a loan against your Spanish real estate.

How you can use this finance will depend on the lender. Not all lenders offer international equity release; some will be more comfortable with certain scenarios than others.

That said, an increasing number of bridging lenders will offer considerable finance against Spanish property – over a million euros is common and more is possible. Many lenders happy to see borrowers use the loan for investments, buying assets, buying more property, investing in a business, consolidating debt and so on. You do not have to use this equity in Spain but, in many cases, can deploy the capital in other countries.

With any equity release, having a solid plan for how you will manage the funds and repay the loan in place is imperative. Lenders will need to be confident in your ability to achieve your goals and repay the loan – or refinance it – at term.

Spanish bridging loans are a short-term financing product, and you will repay these loans in a slightly different to how you would repay long-term finance or a mortgage, which is usually repaid over many years.

Bridging loans can have a very short term, lasting even for a few days. They are usually used for a few months and up to three years at maximum. Because they are so short, lenders will want to understand how you plan to repay the loan. It’s important that you can present a feasible exit plan for your Spanish bridging loan that gives lenders confidence.

There are plenty of options for paying back a Spanish bridging loan – also called your exit. Options usually include:

Refinancing

Refinancing is one of the most common methods of repaying a Spanish bridging loan. Here, you will take out a loan with another lender, usually switching to a longer-term (and therefore less expensive) type of loan. Your new lender will pay off your Spanish bridging loan, bringing your agreement to a close. Most bridging lenders are used to borrowers refinancing, provided they see an easy path for you to do so. Enness can often arrange for a refinance at the same time as negotiating your Spanish bridging loan, if it is helpful for you and helps offer lenders the confidence, they need to give the deal the green light.

Sell Property

Another common way of exiting a Spanish bridge loan is by selling the property that your loan is secured against. You will usually take this path if you took the loan to raise capital quickly or to raise finance to buy a new property before your old home (either in Spain or abroad) had sold.

If you opt for this route, lenders will be looking carefully at demand for the area your property is located in and how easy it will be to sell and property and your plans to have this done by a certain date. It will not be enough to simply put your home on the market – they will want to see how you plan to manage the process.

Use Other Assets/Capital

Another option for repaying a Spanish bridging loan will be to use capital from another source (sale of other assets, sale of other property in your portfolio, a liquidity event) to repay the loan capital. Lenders are very open to bridging loans being repaid in this way, even if this is done in a relatively unusual way, like via a divorce settlement or inheritance. 

Many lenders that offer Spanish bridging finance will consider scenarios where you want to use loan capital internationally. In essence, this is any time you want to secure bridging finance on a Spanish property but use the proceeds of the loan outside Spain.

This international element is usually seen in cases where you want to release equity from a Spanish property, given it’s increasingly common for borrowers to want to secure a loan against Spanish real estate but use the loan capital abroad. You may want to use the loan to buy property in another currency outside Spain, invest in international markets, consolidate foreign debt or create liquidity for a project you want to pursue in a country that doesn’t use euros, for example.

By nature, bridging loans can be used flexibly, and lenders recognise that they need to cater to the various ways borrowers want to use these loans to win business. As a result, most Spanish bridging finance lenders will offer loans in different currencies. Loans in euros are possible, but they are by no means the only option, and you can take a loan in another currency, even when it is secured against a Spanish property. For example, loans in pounds sterling and US dollars are very much possibilities, as is something like a loan in Swiss francs.