Remortgaging In Spain

Re-mortgages with or without extra funds

Whilst re-mortgaging in Spain is possible often the costs of doing so far outweigh any benefit you may achieve and may not be cost effective for rate alone. Should you require extra funds or need to move to interest only then re-mortgaging could however help you achieve your overall objectives.

Most loans in Spain are variable trackers and most mortgages are linked to an annual review. If you move loan while Euribor rates are dropping you may link yourself into a lower total rate but in fact have overall terms that are worse than your current lender. It is the margin above the relevant Euribor and the Euribor type that is important for you to consider not the current overall rate being quoted.

There are two ways of moving your existing mortgage.

One is to subrogate or transfer existing loan to a new lender. Not all lenders will subrogate but if they do you will have to meet and follow the laid down procedure as per the government legislation of 2006. Subrogation has the benefit of reducing significantly the cost of moving by avoiding mortgage deed tax a cost that is applicable on all new loans in Spain and equates to 1.8% of lending.

To avoid this tax the new lender must offer improved interest rate or an extended term and then via the notary your existing bank must be given 20 days to match the new terms or release you. Movement of the loan to interest only, extra cash out or any other features being provided do not constitute reasons for subrogation being allowed and therefore the mortgage deed tax saving. Your existing bank can match interest rate but refuse to meet any other features to force the subrogation process to be stopped. Whilst you save on mortgage deed tax all other normal costs of a mortgage would apply. These will include a valuation fee, a bank arrangement fee and notary and land registry costs. These will total around 2% of your loan amount and will have to be covered by you or added to loan if loan to values allow.

The second means of re-mortgaging is straight forward closure of one loan and instigation of a new one. In this instance you have no government process to follow and are free to leave your existing lender at will; however all costs of moving the mortgage including mortgage deed tax will apply. In total these costs will be around 4% of lending and include all the costs above and mortgage deed tax.

At 60%, there is a bank that will subrogate your existing loan and cover costs of subrogation and charge no bank fee for arranging mortgage. Costs covered include valuation, notary and registry costs and up to 0.50% of your existing banks redemption penalty. You will still have to allow for travel costs to sign new mortgage deed in Spain or cost of a lawyer doing so on your behalf.

Minimum loan size is € 100.000 but the bank can also provide extra funds within their loan to value restrictions and a period of interest only up to 5 years.

All lenders in Spain require full income documentation no self-certified loans are currently available and no buy to let mortgages exist.