Owning a home abroad can be a minefield! Not only do you have to look after the property and organise any rentals and services from afar, you also have to understand all the relevant financial implications of your purchase.
HomeCareontheWeb can of course assist you with your Property Care and Rentals Management needs - and now we can also help you get the best financial and tax advice through our various expert partners.
Here’s some important information for you about:
If you need a Spanish mortgage we work closely with Easy Mortgages Spain, a firm of independent mortgage advisers that specialise in providing impartial advice to non residents and ex pats.
Their goal is to deliver a professional and efficient Spanish mortgage service and constantly research the whole market to ensure that the most competitive and best Spanish mortgage products are available.
Easy Mortgages Spain offers a full range of Spanish mortgages for home purchase or building a Spanish property including:-
- Interest only mortgages
- Fixed rate mortgages
- Currency mortgages
- Mortgages over 1 million Euro
- Tracker mortgages
- Self-build mortgages
- Corporate mortgages
- Country properties
General Product information
Spanish Mortgage LTV
The maximum loan available to non residents is 70% LTV
(loan to value) based on the purchase price or valuation of the property, whichever is the lower. Spanish residents can lend up to 80% LTV
(loan to value) based on of the valuation of the property (mortgage must not exceed 100% of price declared on the title deeds).
Interest Only Spanish Mortgages
Interest only Spanish mortgages are available but are limited to the first 5 years of the mortgage term. The mortgage reverts to capital and interest for the remaining mortgage term.
Spanish mortgages track one of the Spanish Euribor base rates with a fixed margin above that base rate for the term of the mortgage.
Spanish mortgages are available over terms of 10 to 40 years but the loan has to finish by age 75.
Spanish Banks usually charge an arrangement fee of between 1% and 1.5% of the mortgage loan and this is deducted from the mortgage amount they are granting.
Early repayment penalties
The maximum early repayment penalty allowed by the Bank of Spain is 0.50% of the outstanding balance and must reduce to 0.25% after 5 years.
Most Spanish banks insist that a life assurance policy is taken with a mortgage. This will usually be a policy they arrange for you and will normally cover the mortgage loan in full or in part.
Proof of Income
Spanish banks need to fully assess your circumstances and ability to repay a mortgage. Below is a typical list of what is required although some banks can request more:-
- Copy of current passport
- Last 3 months pay slips (For self employed 2 years tax returns)
- Last annual Tax certificate (P60)(For self employed last annual tax calculation)
- Last 3 months bank statements
- Credit history report
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Understanding Inheritance Tax
Inheritance tax is a huge concern for anybody who owns property in Spain. It is a vast subject which we can’t explain in complete detail here, however here are some key facts to help you understand the process and the amount you may have to pay.
- The individual recipient is taxed rather than the ‘estate’ of the deceased.
- There is no ‘spouse-to-spouse’ tax free allowance. For example, where both spouses are resident in Spain, if the husband dies the wife can be fully liable on the worldwide assets she inherits from her husband, subject only to the allowances and reliefs available in Spain.
- If the couple are living together but are unmarried, the tax due is even higher and could be at least doubled.
- Ex-pats who are resident in Spain are liable to pay Spanish Inheritance tax regardless of the country in which their ‘estate’ is situated.
- Non-residents are liable to pay Inheritance Tax in Spain only on assets which are physically located in Spain.
- If you own a property and it has been your primary residence for more than 3 years the recipient of the inheritance may qualify for a tax free allowance of €122,136.
The calculation of Spanish tax due is done in five stages:
- The assets of the estate are valued.
- The relationship between the person leaving the inheritance and the recipient is established, i.e. child, spouse, sibling, etc.
- The personal allowance for each individual recipient is worked out.
- The allowances are deducted from the value of the inherited estate to calculate the base tax figure
- The relevant co-efficient provided by the authorities is applied to work out how much tax is paid.
This seems a little complicated, but is explained in detail in the full article on Inheritance Tax - just click here to read more.
There are many ways to minimise Spanish Inheritance Tax, so if you are interested in understanding more about your personal inheritance liabilities, or wish to have a free ‘financial health check’ as a HomeCareontheWeb client, please email our Siddalls adviser direct at David.Rogers@siddalls.net.
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Should you have a Spanish Will?
If you own a Spanish property and you wish to pass it to your spouse, children or a partner when you die it is vital that you make a Spanish will, in addition to your English will.
The law in Spain is very strict regarding inheritance and if you die without a Spanish will, two-thirds of the estate will go to your children and only one-third to your surviving spouse. However, as a foreigner you are able to decide how you want to split your inheritance as the English law applies, but your wishes have to be contained in a Spanish will.
This is an important matter and must be done using the services of an experienced lawyer with an understanding of both the Spanish and English systems. Once you and your lawyer prepare the will, you need to go to the Notary and have the will witnessed.
Making a simple Spanish will is not normally that costly but makes it much easier for your loved ones if you pass away. Think about doing it today!
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Save money with Moneycorp when making payments to Spain
The current Sterling to Euro exchange rate is adversely affecting many property owners and tenants on the Costa del Sol who need to make regular payments to Spain from their UK banks.
So we've partnered with Moneycorp - the foreign exchange and international payment specialists - to provide you with a service that will save you time and money when making payments to Spain.
The benefits of using MoneyCorp
If you need to make regular money transfers to Spain, it pays to use the experts:
- Making regular transfers via Moneycorp is faster and more convenient than using a bank.
- MoneyCorp collect Sterling from your UK bank account by agreed Direct Debit and then send the foreign currency abroad.
- They don't charge commission - and guarantee that you won't pay Spanish bank charges when your money arrives in Spain.
- More importantly, their better rates of exchange will mean you get more Euros to the pound.
- The 'Regular Payment Plan' they offer is fully automated and hassle-free.
- They provide other flexible plan options and a range of payment frequencies.
MoneyCorp Regular Payment Plan
This could be the ideal payments service for you as it's specifically tailored for:
- Mortgage payments
- Pension transfers
- Salary transfers
- Property maintenance payments.
Once you've set up an account with MoneyCorp, their experts will monitor the currency markets on your behalf, helping you to secure the best possible rates of exchange each time you need to transfer money to Spain.
Transferring money out of Spain
MoneyCorp don't just handle Pound to Euro transfers. They can also help you transfer money out of Spain at the most favourable rates – for example if you sell your Spanish property - which could save you a huge amount.
Find out more about how to make your money go further by visiting the MoneyCorp website
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