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How can I secure a mortgage in Spain with proceeds of the sale of my UK property?

Financial Law

Antonio Flores Vila

8th of October 2001

Q. I'm very interested to take out a Spanish Mortgage. Having seen your details via the internet, I was hoping you maybe able to answer some questions.

In May 01 I purchased a property in Torre De La Horadada close to the Costa Calida. So far I have paid 2.000.000 pta's with an outstanding balance of 14.130.250 pta's. The property is due for completion in Feb 02.

I have a Spanish bank account with BCH, San Pedro Pintar (Murcia) and I have also registered with Notary Office in San Pedro del Pinatar. The purpose of the property is for a main residence and we intend to work in Spain.

At the moment we have 3 options available to us.
  1. Sell our UK property and buy the Spanish house for cash and invest the additional capital.
  2. Rent the UK property and obtain a loan on the Spanish property. Rentable value 1,200 per month.
  3. Sell the UK property and invest the raised capital Offshore. Capital to invest 100,000. Ideally I would like to go for option 3.
My question is as follows:

Could I secure a Spanish mortgage based on options 2 or 3? (Assume I can not demonstrate an additional income until we start working in Spain)

Paul Bibby

    A. The idea, with a Spanish bank, is not to tell them you will be becoming a resident in a short period of time, as they may be inclined to ask questions relating to your new income structure in Spain.

    Regarding your proposed options, I comment briefly on them:

    1. "Sell our UK property and buy the Spanish house for cash and invest the additional capital."

      Not advisable, as in my opinion it is always an advantage to borrow.

    2. "Rent the UK property and obtain a loan on the Spanish property. Rentable value 1,200 per month."

      Banks in Spain do not lend on the basis of rental income unless this income is properly declared and included in your income documentation. If this income we can prove officially, no problem.

    3. "Sell the UK property and invest the raised capital Offshore. Capital to invest 100,000. Ideally I would like to go for option 3."

      Safe offshore investments bonds are yielding around 7-8%, according to the latest information I have. That would mean that if your mortgage is around 5.5%, there is still a profit being obtained. However, this is provided you can prove an income in the UK before Feb. 2002.

    4. Another option: Send part of the proceeds of the sale of your UK property to Spain and lodge in a deposit account with the lender. You will not have to prove an income if an amount equivalent to the mortgage capital is deposited with the lender. Although you will not get a percentage close to that of an offshore bank, you may be able to negotiate a) a lower mortgage loan interest rate and b) a higher interest rate on your deposit. The bank will be presented with good business and they will compromise.


    Always bear in mind that banks like to see an income declared to the taxman in your country of residency, and failing this, they need other proof of your ability to repay the loan.


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