Mortgage Costs

For specific details about Spanish Mortgage costs and to see the different documents required dependent upon employment status click on the type of mortgage you are interested in:

Purchase Mortgage

Remortgages in Spain

Equity Release in Spain

The costs of obtaining a mortgage in Spain vary depending upon the bank and also on the type of product you would like. In real terms the difference on a purchase of a property for 200,000 Euros:

Costs of purchase without a mortgage:

20,000 Euros (10%)

Costs of purchase with a mortgage of 140,000 Euros or 70%:

(140,000 x 1%) 1,400 Euros + (140,000 x 1.8%) 2,520 Euros + (140,000 x 0.5%) 700 Euros = 4,620 Euros

Your mortgage has cost you an additional 4,620 Euros which equates to 2.3% of the total purchase price.

So what do you get for your additional cost and why should you not buy cash if you can afford to?

Advantages:

Rather than spending 220,000 Euros to buy your property, you only spend 80,000 Euros keeping 140,000 Euros in your bank which can be used for another purchase or invested to offset your mortgage payments. This keeps you liquid and means that if for some reason you need cash, you dont have to re-mortgage or take a loan. Your money is available when you need it.

This also gives you what is called leverage, a term used in investing. The idea of leverage is that you can purchase a 200,000 Euro property with only 80,000 Euros cash.

If the value of your property rises from 200,000 to 300,000 Euros over a set number of years then ordinarily your gain is 100,000 Euros or 50%.

But, if you had used a mortgage and only spent 80,000 Euros, your 80,000 Euro investment has netted you the same 100,000 Euro gain which works out at 125% – a huge difference.

Now, from that you must take into account monthly mortgage payments BUT by keeping your spare cash in a high interest savings account or investment, you have managed to pay the interest on your mortgage every month and profited from the price rise.

Leveraging makes your money work harder for you whilst allowing you access to your money should you need it.

Mortgages provide you with this leverage.

Additional advantages include mortgage interest tax relief if you are resident in Spain as well as inheritance tax benefits. Used correctly, Spanish mortgages are an excellent financial tool if you are planning to purchase.

If you need more information or would ike to speak to an expert about your mortgage options in Tenerife or Spain Contact us now

Comments are closed.