Mortgage for €1.15 Million Property in Luxury Spanish Development

• Client: European national and UK tax resident with significant liquidity
• Property: Off-plan luxury property in Spain forming part of a new golf development
• Challenge: Unusual and inconsistent income, an existing UK mortgage and a property that was difficult to value
• Finance: €1.15 million mortgage at 70% LTV on a 20-year fixed-rate repayment basis

The Spanish property market has long attracted international buyers, but securing finance for an off-plan property can become more complicated where the borrower has an unusual income structure and existing mortgage commitments. Enness was approached by a European national and UK tax resident looking to purchase a property within a new luxury development in Spain.

The property was an off-plan contemporary home forming part of a new development alongside a newly constructed golf course. Completion was expected in early 2019, and the client wanted to arrange substantial mortgage finance to fund the purchase as a future retirement property.

There were several challenges to overcome. The client’s income was generated through a limited company and had been inconsistent over the previous three years, making a conventional affordability assessment more difficult. The client also already had a mortgage on a UK property.

The property itself created another consideration. As it was the first property to complete within the development and featured a distinctive contemporary design, establishing an accurate valuation was more complicated. This was particularly important because Spanish lenders can take a conservative approach to property valuations when determining how much they are prepared to lend.

Spanish lenders can also apply relatively conservative debt-to-income assessments, meaning existing mortgage commitments can affect the amount of additional borrowing available. The application therefore required a lender prepared to take a broader view of both the client’s assets and the timing of the existing UK mortgage.

Enness identified a lender that was able to consider the client’s significant liquidity alongside the more limited conventional income. An important part of the structure was the timing of the existing UK mortgage, which was due to end before the new Spanish mortgage commenced. The lender was able to take this into consideration when assessing the client’s overall debt position.

The resulting facility provided €1.15 million of borrowing at 70% loan to value (LTV). The mortgage was structured on a capital repayment basis over 20 years, reflecting the fact that interest-only mortgages are generally not a standard option with Spanish banks.

The initial fixed rate was 2% for the 20-year term, with the effective rate reducing to approximately 1.55% after applicable deductions at the time.

The case demonstrates how specialist mortgage expertise in Spain can be valuable for international buyers with more complex financial circumstances. Off-plan properties, overseas mortgages, variable income and conservative local lending criteria can all affect the structure of a Spanish mortgage, making access to the right lender particularly important.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, property suitability, valuation and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances.

Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise. International property finance can also involve currency and cross-border considerations, and exchange-rate movements may affect the cost of borrowing or the value of assets when converted between currencies.