Spanish Lending – The Merits of Borrowing in Today’s Climate…


In moments like these you need to be speaking to the industry experts who have long-standing relationships with lenders, who know how to handle the challenging times. TMC prides itself on dealing with the best of them...! Here we speak about the merits of borrowing in today's climate...

Since starting out in the real estate market here in Spain in 2000 we have seen some turbulent periods and been presented with many economic challenges not a far cry from the market conditions we exect to find ourselves facing over the coming months.

As a company we are aware it might take time for consumer confidence to return to where it once was so we are working hard to keep up to date and best placed to be able to offer appropriate & qualified guidance during this difficult period.

One important part of this is to stay in constant contact with our other business professionals that specialise in other fields within our industry as they are key to our success and are vital to our continued high levels of service for all aspects of buying and selling property on the Costa del Sol.

One such relationship is with our mortgage advisory company, also based in the main street running through San Pedro de Alcantara in Marbella, where all the staff are industry veterans and have been through the same crises, downturns and recessions over the years and like ourselves, are still here to tell the tale.

Having pushed the pause button post Brexit referendum 2016, Brits had just regained their confidence in the Spanish property market when COVID-19 pulled the rug out from under them but many are still keen to get a purchase sewn up before the transition period ends in December 2020.

Other overseas buyers also have their minds set on making the dream of moving to Spain a reality and people of all nationalities have been hit hard by the events of the last few months…

Even though a return to full service is now possible things will take a little longer than usual to finalise in the coming weeks and as cash becomes king, people are inclined to spend as little as possible.

For some people it may seem that a home overseas might turn into a holiday abroad for the time being, but there might be good reason not to give up on the Spanish homeowning idea without further considering local finance options reducing the amounts needed to use from valuable cash reserves..

Sharing the financial burden of completion with a Spanish bank could be the difference between securing that home in the sun or leaving the idea shelved.

There are now short-term, flexible, over-payment mortgages available in Spain which mean borrowers don’t have to be tied into a long-term arrangement and can cancel the mortgage at any time, without incurring heavy redemption charges or cancellation fees. 

As age is not much of an issue, due to Spanish banks being able to lend on pension income it opens the option up to almost anyone with a suitable status. Currently average mortgage interest rates are very low at around 2.5% and are likely to remain that way as Europe feels its way through post-crisis recovery.

Fundamentally, any mortgage debt will be against the property in Spain and therefore will not affect any creditworthiness or credit score in home countries nor hinder the ability to obtain credit back home. 

It’s also worth bearing in mind that equity release isn’t always impossible in Spain, so if buyers are under the impression they could release funds from their Spanish property at a later date they could be left disappointed so buying with a mortgage and keeping cash is best considered beforehand.

Expectations going forward…

Western economies were in fairly good shape before this unforeseen turn of events, so after a sharp correction of say 8-10%, prices are expected to rebound quickly, especially as governments and banks are preparing to pump liquidity into a number of business sectors to get them back on their feet. 

As we have already seen in previous situations, hotspots such as Marbella and Mallorca will be less affected as people invest in a change of lifestyle when buying and as many homes are second residencies for property owners the amount of people forced to sell never outweighs those looking to buy so once the initial reaction subsides things will likely return to normal levels.

To back this up, the last figures compiled by the National Statistics Institute before the Covid-19 outbreak took hold showed that ‘tourist’ areas such as Andalucía and the Balearics posted very healthy demand, with house sales rising 8% and 8.2% respectively versus February 2019.

In moments like these you need to be speaking to the industry experts who have  long-standing relationships with lenders, those who have been there before and who have a history of delivering during difficult times. We pride ourselves on being able to help our clients find the right advice from those at the pinnacle of matters and Spanish borrowing is one such subject.

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