Buy to let mortgages on Spanish property
Mortgages for buy to let properties in Spain have proved incredibly popular with overseas buyers since their introduction. Looking for a buy to let mortgage may mean you want your Spanish property to make money when you are not staying there. Alternatively you may be a pure investor who never intends to stay in their Spanish property.
Why buy to let in Spain?
You might want to buy a holiday home but at the same time there is a nagging feeling you should be investing your money. Why not do both at the same time?
Spain’s enduring popularity in the holiday market means there are no shortage of tourists looking to rent apartments and villas in Spain.
Many overseas buyers enter the Spanish property market with the aim of combining business with pleasure. They hope to be able to grab a few weeks at their Spanish villa or apartment and rent it out at other times to generate income.
How easy is it to get a buy to let mortgage on Spanish property?
Buy to let mortgages are still a fairly novel concept in Spain which some lenders will not entertain. The main concern of banks when you apply for a buy to let mortgage in Spain is whether you have the ability to finance it.
As with any mortgage it becomes easier to obtain when the loan is lower with regards to the value of the property. If you were to look for a buy to let mortgage in Spain it would be far easier to arrange a loan of around 50% of the value. Loans of 80%+ which are commonplace in Britain are far rarer in Spain.
However, the value of the property is not necessarily what you pay for it. A qualified valuation expert will place a figure on your Spanish villa on behalf of the bank and it is this value you can borrow an arranged percentage of.
It will also be easier to secure a buy to let mortgage, and a higher percentage of the value, if you have guaranteed rentals for the Spanish property. This is obviously more applicable to those buying Spanish property to let as a pure investment.
That said, when proving ability to pay a mortgage, a bank will not usually count income you hope to generate through letting out the Spanish property. Therefore, the decision whether or not to lend will be based upon your assets and earnings BEFORE rental income is taken into account.
What else do I need to know about buy to let mortgages in Spain?
Buy to let properties in Spain tend to have a slightly higher rate of interest than a home loan because they are perceived to be a higher risk.
The rates on buy to let mortgages in Spain are normally linked to the Euribor (Euro Interbank Offered Rate). Over the last few years it has been lower then the rates set by the Bank of England.
You should also be aware that capital gains tax, inheritance tax and exposure to currency fluctuations may affect your returns.
To make your buy to let Spanish property a worthwhile investment, your rental income should cover the mortgage plus an additional 30%.
