Spanish mortgages to purchase and refurbish
So you have had a good look around and now you know exactly where you want to live in Spain. The area has everything you wanted, including shops, bars and restaurants nearby and it’s only a short drive to the Mediterranean coast.
That is part 1 of the dream achieved, but what happens if you cannot find your dream home in that area? Do you sacrifice location to find a house you like or do you sacrifice the house to live in the area you have fallen in love with?
Perhaps you don’t have to sacrifice anything at all
The solution could be to buy a property in the area you love and then refurbish it to suit your requirements and tastes. However, this option is often a non-starter because the cost of refurbing a property usually has to be covered by savings and a lot of buyers, particularly those purchasing with a mortgage, just do not have that extra cash.
Indeed, a non-resident in Spain purchasing a property with a Spanish mortgage will still need to invest approximately 45% of the price of the house in savings to cover purchase costs, which mortages do not cover.
Is there a financial solution?
Hipoteken is very happy to inform you that Spanish mortgages to purchase and refurbish a property are now available. As a non-resident, these new Spanish mortgages can fund up to 70% of the purchase price of your property (80% for Spanish residents) and 100% of your refurb (up to a total value of 30% of the purchase price of your property).
Just to give you an idea of how affordable this makes purchasing a property in Spain to refurb, consider this. If you would like to buy a property for €200,000 and then spend another €60,000 on refurbing it to meet your needs, non-residents in Spain would only need €90,000 in savings (and residents only €70,000). Here is a simple breakdown of costs below and what the mortgage would cover.
The numbers
- House purchase price = €200,000
- Mortgage LTV for non-residents in Spain = 70% and for residents = 80%
- Refurbishment budget = €60,000
- Amount the mortgage can cover for non-residents in Spain = €200,000 (€140,000 + €60,000)
- Amount the mortgage can cover for residents in Spain = €220,000 (€160,000 + €60,000)
- Purchase costs = €30,000 approximately
- Total investment in savings for non-residents = €90,000
- Total investment in savings for residents = €70,000
The process
In order for the bank to value the refurbishment, you will need a builder to provide you with a budget. You may also need to hire an architect to design and submit a building project to the local Town Hall, although this is only required for significant refurbishment projects.
As a result, it is a very good idea to do a second viewing of the property with a builder before you initiate the purchase process, so you can ascertain what you can and cannot do within the aforementioned budget of 30% of the purchase price (the maximum amount of refurbishment this new mortgage can cover).
Once your builder has produced a formal budget for the refurb project, the bank will send an independent valuation company to value the property in its current state and also to do a second valuation estimating the potential worth of the property once the projected refurbishment has been completed.
The bank will release the funds to cover the cost of the refurbishment to the builder directly, as the refurbishment project advances and the valuation company does regular scheduled visits to monitor the progress of the building work and update the bank.
If you are interested in finding out more about this new Spanish mortgage for purchasing and refurbishing a home in Spain, just get in touch with our multilingual team at Hipoteken and we will be delighted to help.
Conclusion
In conclusion, this new Spanish mortgage option allows non-residents to finance both the purchase and refurbishment of a property in Spain. This mortgage can cover up to 70% of the property’s purchase price and 100% of the refurbishment costs, making it a viable solution for buyers who wish to live in their desired area but need to renovate a property to meet their needs.
Got any questions about pre-approved mortgages?
Don’t hesitate to contact Hipoteken for a no-obligation chat with one of our experienced specialists.
You can call us direct on (0034) 960 599 967, email us at info@hipoteken.com or fill in the form on our Contact page.
