Re-Mortgaging in Spain in 2010? Five Things to Consider Before You Try

The Barcelona Real Estate market was out of control in 2007

. Absolutely everything which was sold made a profit, and the average price per square metre was at 3800 Euros. Fast forward to December 2009, and you can quite easily slash 500 Euros from that price, which although might not seem like much, if youre buying a one hundred square metre apartment in the city, youll already be saving 50,000 Euros. Taking into account the number of brand new properties which are lying unsold as well as those people looking to upgrade or simply those who havent been able to afford the constant rise of their mortgage repayments, and it really is a buyers market at the moment, and many people are getting some fantastic deals. Its important to note first of all that before you start looking to invest in Barcelona, like many areas in Spain and indeed Europe at the moment, then your financial situation should be absolutely water-tight. Many of the lenders and financial institutions in 2010 are offering a fraction of the services and completing a tiny amount of operations and loans in comparison to years gone by. While its true that banks are launching advertising campaigns to attract customers in with never-before seen offers and the lowest interest rates in the history of the Bank of Spain, the requirements to qualify for those rates are equally as un-reachable. Here are five things you need to know. Firstly if youre an investor, forget about it. The exceptional interest rates and terms only apply to the habitual living space i.e. your own home, and banks and building societies are not interested in second homes, investment opportunities or summer chalets. Another huge shift in the mix which may come to a surprise is the percentage that financial entities expect you to be able to cover in respect to the repayments that the new loan will offer. That sounds more complicated that it is. What it means if that a couple of years ago, lenders would see how much you and a partner earn (or you alone) and then only offer a mortgage if the month repayments did not exceed around 60-65% of that amount. So in plain English if you earn 1000 Euros a month, the mortgage repayments cannot be above 600-650 Euros. In 2010 this figure has dropped to a tiny 40%. Which means for the same property, with a repayment of 600 Euros, you need to be earning 50% more than a couple of years ago. A third thing to be aware of is the risk seems to have increased. Thinking about it logically, if youre going to a bank to re-arrange your mortgage it means youre unhappy with the repayments and want to see if they can offer a better deal. This means that as long as youre managing to keep up with the current re-payments, then the new deal on offer should be absolutely no problem. Number four on your list of things to check is the type of interest youll be offered. Most financial entities opt for one of two indexes; Irph or Euribor. Without going into too much boring detail, the Euribor is the European interest rate and you will be charged a percentage on top which is the banks profit. The IRPH index is a combination of the previous few months Euribor to create an average, supposedly more stable, although this is not the case. Finally, remember that there is no such thing as a tracker mortgage in Spain, so your rate will be fixed for one year, and each payment will be the same. In one way this is good, as you know the same amount youll need to raise at the end of each month for your home loan, but dont expect the repayments to fall if theres a drop in the indexes, similar to what happened over 2008 to 2009 in Spain and Europe as a whole.

Re-Mortgaging in Spain in 2010? Five Things to Consider Before You Try

By: David Brydon

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