Posts Tagged ‘Spanish Mortgages’

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Need A Hacienda San Cayetano Development Mortgage?

Monday, October 19th, 2009

Clients completing on the Hacienda San Cayetano Development in Costa Calida, Murcia are now being contacted with completion dates.

The development was not funded by a bank so no developer’s mortgage is available which means clients requiring mortgages will need to shop around for their financial needs and arrange independent loans.

If necessary to allow this to happen clients may need to delay anticipated completion and negotiate with the developer for a little more time.

It is hoped the developer will be reasonable in allowing this extra given the complete change in mortgage availability in comparison to when most clients made a decision to buy.

For information on what lending facilities could be obtained and information on how to try to get an extension on completion date contact IMS now.

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CAM Bank Spain Sends Out Threatening Letters To Clients In Mortgage Arrears

Friday, October 16th, 2009

A number of clients who currently hold CAM bank mortgages and are in arrears have recently received letters in the UK from a lawyer firm telling clients that should they fail to bring the mortgage up to date it is possible CAM Bank may pursue assets in the UK.

Whilst clearly the bank has the right to try in anyway they see fit to ensure the mortgage arrears are cleared these tactics; without also offering workable payments solutions for clients in difficulties; is harsh and possibly misleading.

Whilst it is true that ultimately should they be left with an outstanding debt CAM can technically look to the UK to recover money (so no client should ignore the possibility) the process and facts are less black and white.

Firstly, the process of repossessing the property would have to happen and then the property would have to be sold to crystallise the actual debt outstanding. This can take years.

Secondly, whilst it may be true that in its distressed state the property will not reach the amount outstanding; to pursue a UK residents assets to fill this shortfall would require UK court action.

Logic says that unless the bank is clear the client has sufficient net asset wealth in the UK; where another lender does not already have a first charge; and that the loan level outstanding is sufficiently high enough to make the cost and time of going through UK courts worthwhile even CAM bank will not add to their woes by pursuing further small outstanding amounts through a long legal process in the UK.

It would also be difficult although not impossible to see a UK court agreeing to their action when most clients have had little or no advice upfront into exactly what they were signing at outset and where the bank took no steps to ensure this was the case. CAM rarely or never offer workable solutions to clients to assist in keeping up payments like offering a term of interest only, a minimum payment for an agreed set time’ or a payment holiday as would be expected of UK lender which again would not work in their favour.

In the UK lenders are expected to have demonstrated they have done everything within their power to avoid getting to the point of court action and are heavily criticised if this is not the case.

CAM’s solution to their own problem; which has occurred because they of all banks in Spain took on risky non resident lending at high loan to purchase prices, undertook poor due diligence on documentation and left many lending decisions in the hands of branch managers who were only targeted on sales is to threaten rather than negotiate and worse than that threaten something that they know will cause severe stress and concern to their clients but in reality is unlikely action they will take.

Of all the enquiries, we get for re-mortgages 75% of them come from existing CAM bank mortgagees which sums up how poor across all elements of customer service CAM is.

My advice would be do not ignore the letter and take your own legal advice immediately if you are in arrears.

If you are not in arrears but fed up with CAM’s lack of service look to change to another lender where costs of move are covered; like the Halifax Switch and Save.

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Posted in Spanish Banks, Spanish Mortgages, Spanish Property | 5 Comments »

Spanish Banks Adding Compulsory Products To Mortgage Terms

Friday, October 16th, 2009

Increasingly all banks in Spain have been adding compulsory and for them profitable products to their mortgage offers.

It is in fact not legal in Spain for the banks to tie clients into products outside buildings insurance and a bank account unless the client gains a rate benefit for doing so. This seems to however be making no difference to the banks insisting on clients taking up; in particular life insurance; for the benefit of having a loan.

Where a bank links the rate or margin above Euribor to the taking of a specific product this will be written into the mortgage deed and should you cancel the linked product during lifetime of loan a new higher rate will automatically be applied. Whilst having the reduced rate may appear attractive, the cost of the linked product each month needs to be added to the monthly payments and often makes the overall terms more expensive than a higher rate without. If life insurance is required by the you this is of course not an extra cost and the lower rate may be of benefit but if life insurance is not necessary then this is just another sum of money on top of costs expected.

For banks that do not provide a specific rate linked to products; to gain an approval clients may however still find themselves being blackmailed into taking an insurance policy just to get an offer. Whilst it is not legal to insist a client takes the product a bank can of course reject an application without giving rationale so playing the game to get an approval is the pragmatic approach most clients will take.

Under this scenario however whilst the client may have to sign up for life insurance in year 1 the insurance requirement cannot be embedded in the mortgage deed and if the client cancels policy after year 1 there is absolutely nothing a bank can do to force client to take it in subsequent years.

Because of the cost of extracting yourself from Spanish mortgage terms at a later date; it is important to check if life insurance is being stated as compulsory for an offer of lending and whether this is going to be written into mortgage deed and linked to a rate or not. You can then assess what level of flexibility to dispense with the insurance cover at a later date you may have.

The poor behaviours of banks who are taking advantage of the overall difficulties in the worldwide lending market to force clients into taking other products immaterial of whether they are required or not is extremely frustrating. The law, which should assist to stop this happening, is toothless because it only relates to a completion and ability to place requirement in a mortgage deed; banks can do what they like when deciding whether to complete on a particular application. One lender in Spain “Bancaja” have a central risk department team that underwrite and approve an applications but the branch managers of the local branches who have the final say can, and often do, refuse to complete unless life insurance is added so if you want the loan you have to sign up or go without the mortgage even though you fit bank criteria.

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How to avoid the current poor exchange rates when buying in Spain.

Wednesday, October 14th, 2009

Whilst many bargains exist in Spain low exchange rates are negating some of these benefits.

Many cash buyers are torn between accessing property at low purchase prices versus the real cost given current Sterling to Euro rates.

Whilst setting up a Spanish euro mortgage to overcome this is one solution many buyers are put off by the costs of setting up a mortgage for what is expected to be a short to medium timescale. Spanish mortgage costs for those clients who know the requirement is only temporary can be prohibitive.

There is now a product available that allows cash buyers in Spain to maintain their funds on deposit in sterling and against the security of funds obtain a credit line in Euros that can be used to complete the purchase. Because a credit line rather than a Spanish mortgage is set up, costs like mortgage deed tax, and valuation fee are avoided.

The deposited funds can be placed in a range of guaranteed capital accounts dependant on clients preference. With the right selection of deposit or bond account, the interest rate difference between the rate charged on the credit line and the rate paid on the deposited funds can be as low as 2% which is in line or below current mortgage rates.

Cash held in sterling by the bank must exceed the credit line facility level to cover risk of further exchange fluctuations but with an insurance policy taken by client the bank can provide up to 90% of the sterling equivalent in Euros.

For clients who are not pure cash buyers and require up to a 50% mortgage the bank can satisfy both requirements. Provide up to 50% on a mortgage using property as security and provide a cash line against the deposit monies for the rest of the funds required for completion. This means even for buyers who are not complete cash buyers the ability to not change up sterling to Euros in current financial environment can be 100% avoided.

For further information, contact us now.

www.imsmortgages.com

heather@imsmortgages.com

+ 34 952 45 97 45

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Polaris World Offering 90% Spanish Mortgages For Non Residents

Wednesday, September 2nd, 2009

Polaris World yesterday sent out marketing literature offering specific units on their developments with  90% Spanish mortgages for non-residents. As the year progresses we should see more of this type of activity as Spanish banks and developers alike try to move unsold property.

If a bank in Spain has had to take back a unit on a large development due to non-payment of mortgage, they may consider allowing the unit to be marketed with the loan level that currently is secured against it. If the original loan was secured a couple of years ago against a higher valuation the loan level; if maintained; will currently equate to much higher percentages of purchase price now than the general market would allow for a new loan.

The units may hold developer loans where the Spanish bank committed to a loan for construction. In general, banks gave 60% of purchase price to developers to construct and it is this level 60% of previous purchase price that is secured. If the developer cannot pay the mortgage and the developer cannot sell unit at full price it is in everyone’s interest to reduce price of property but maintain mortgage level and provide access to the property to those clients who want a property in Spain but have small cash deposits or investors looking for maximum gearing.

The bank is already mortgaging the property at the level of funding being offered so this is not a new loan but an existing loan being what is called “ subrogated “ to a new mortgagee.

Subrogation apart from possibly providing much higher loan to current purchase prices also has the benefit of saving the applicant having to pay mortgage deed tax. The reason for this is that this tax was paid on this loan at its inception and is not payable again. With mortgage deed, tax at 1.8% of lending this is a significant saving.

Checking before taking an independent loan whether a more cost effective loan at higher loan to values is already secured against a property is something all buyers should make sure happens. In the UK, loans sit with individuals so you can take your mortgage from one property to another. In Spain, it is completely reversed the loan sits with the property so it is possible for a buyer to take over the loan that is already in place.

Whilst there may be some benefits of subrogating an existing Spanish Mortgage, you do have to take it over on the terms currently in place this means this solution is not always suitable and that the loan may in fact be very uncompetitive. An independent overview from an experienced broker on all options is still advisable.

Banks that have funded Polaris World include the following lenders

CAM Bank

Banco Popular

Banacaja

Banco de Valencia

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Bank Of Spain Relaxes Rules On Bad Debt Cover

Thursday, July 16th, 2009

Finally, yesterday the Bank of Spain announced a relaxation of the rules applied to banks when they have mortgages in arrears.

Previously the level of funds a bank had to move to their balance sheet to cover bad debts was very high in comparison to the rules covering banks in other countries.

The very high level of liquid funds the banks had to send to their balance sheet made it difficult for banks to negotiate payment terms and assist clients in trouble as this was very costly for banks to provide. Allowing a client to sit 3 months arrears and then negotiate a payment plan to recoup arrears over a longer term and assist with immediate payment difficulties meant a bank had to move a very large part of the loan to its balance sheet and tie up liquid cash.

The impact of previous rules encouraged the banks to take back property and get the asset on its balance sheet rather than maintain a long-term mortgage with a client who had just short-term issues.

It is hoped that the banks will now use this relaxation of rules to be more pro-active in assisting clients with short-term problems rather than rushing straight to the courts.

We have long predicted the Bank of Spain would have to take measures and hopefully this is better late than never.

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John Howell Associates Closing 10th July

Tuesday, June 30th, 2009

Following on from rather gloomy news last week about Leeds and Holbeck and the continuing pressures on the Spanish mortgage and property market and the international  market in general John Howell Associates one of the leading international but UK based legal firms has announced it is to close from the 10th July. Whilst covering other countries John Howell’s biggest, market was Spain

John Howell states that to cash flow business; given a 75% drop in incomes expected; he put in £ 100k of his own money last year and clearly cannot commercially sustain this until the market recovers.

There are signs of recovery in the purchase market with higher levels of property in Spain being sold in the last few weeks but recovery is slow and will take time; for some firms the recovery will come too late.

Although recovery of the overseas market would be greatly enhanced if lending was more readily available for the right clients and those willing to use larger sums of their own money a mortgage should still be possible and bargains are widely available.

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Leeds and Holbeck Effective Withdrawl From Spanish Mortgage Market

Wednesday, June 24th, 2009

Yesterday afternoon with no prior notice or indication Leeds and Holbeck in all but name withdrew themselves from the Spanish mortgage market.

Drastic changes to criteria have put Leeds and Holbeck products completely out of the market.

Ages have been reduced from maximum age 80 years to age 65 years.
All interest only facilities have been withdrawn.
Income multipliers have been slashed and further restrictions placed on what type of property they will lend on.

Of great concern to most brokers will be the lack of communication prior to change and the decision to not just change product but to do so as of yesterday when communication only came out late yesterday afternoon.

All brokers have been given until Friday if they have an approval in principle to get a fully packaged case to Leeds or approval is lost.  A challenge in itself; any cases where the society has not given an approval are affected immediately.

In their communication, they completely ignored the situation they may have put brokers and clients in. No apology for the necessity of the change and no regard or apology for the inconvenience (to say the least) they may have caused those business and clients who have supported them.

One can only assume from the action taken serious issues are afoot for Leeds and Holbeck as any mutual building society dedicated; as they claim to be to service; would not make these changes immediately without giving time for pending applications to be sorted unless things were dire.

It is either there are real problems here or their claim to quality service for all is in fact just lip service and their ability to communicate effectively with third parties non-existent.

“Just another example of banks disregard for clients and businesses or testing times ahead for one of the few UK mutuals left. Time will tell.”

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ITV 1's Paradise Lost – Good Mortgage Advice Would Have Helped

Monday, June 22nd, 2009

This weeks Spain “Paradise Lost” programme on ITV 1 was an overview of the market in Spain both now and in the preceeding years.

It is difficult when watching a programme like this not feel sorry for some of the individuals involved but for all those involved the issues need never have happened with correct advice. It would have been very helpful if the documentary had outlined on each case study what the actual steps should have been taken and what can be done by buyers wanting to buy in Spain to ensure they do not find themselves in the same situation.

The buyers who bought at La Zenia Elite made a number of errors or were badly advised by their legal advisers. Protection against exactly what happened to them is in place in Spain and is robust and legal. Failure to follow simple rules are what caused the outcome they have. If you are buying off plan in Spain by law the developer must have a bank guarantee. The bank guarantee, guarantees the deposits of the buyers should the developer fail to complete build or go bust. Each development should be able to produce a bank guarantee certificate which clearly stipulates; the terms of the bank guarantee; when it can be invoked and under what circumstances. It will also outline what interest rate compensation would be payable on funds tied up as deposits. If this certificate is not available, visible and terms not understood then deposits should not be passed. If the certificate is in place, is understandable and it’s terms are acceptable then deposits can be safely passed as a bank is underwriting the cash.

Secondly, a development is only complete when the whole development or that phase has what is called a habitation licence. This licence is another legal obligation and is confirmation that all works as per the licences originally granted have been finished and that the property meets the legal standards required. Without this licence it will not be possible to get direct mains water, electricity etc connected to individual properties so anybody moving in before it has been issued will rely on developers utilities. The habitation licence may take some weeks to be granted and people do get talked into completing before the certificate is issued by Town Hall. Passing over full funds and completing at Notary before it is issued is one of the most common mistakes made and under no circumstances should a buyer do so.

Legally they cannot be forced to complete whatever pressure they are put under by the developer or seller without this document. Legally the document confirms all works are completed to the standard required. Without this licence at any time the property could be deemed as built illegally, not meeting the original plans that permissions were granted under and getting utilities connected may be impossible. With it you are safe.

The same applies to re-sales if it does not have an actual certificate available even on older properties take great care and ensure property is not only registered locally but forms part of the Junta’s and national current 5 year urbanised plan known as the PGOU. All buyers should read the small print on any marketing material as all developments only require the developer to finish and complete the buildings for living no contract ever requires the developer to complete any additional infrastructure including club houses, golf courses, health clubs gardens etc.

All buyers should take this account when deciding to buy as if not having the golf course would mean you would not buy don’t buy because there is no guarantee or obligation for it to be provided by law. If the golf course is a specific requirement and what makes the property appealing buy a property where the golf course is completed not in the planning stages.

It would be very helpful both for buyers and the total market if along with the headline horror stories these type of documentaries helped educate people how to take all precautionary steps they can and how to understand the actual remaining risks they may be taking. Most things in life are a risk but taking an informed risk is a completely different ball game to taking an uninformed risk.

It is not true and has never been true that banks accepted mortgage applications if you “ had a pulse and a passport”. When I started arranging mortgages in Spain some years ago it was true that the banks did less checks than now but the real issue has been the exodus of brokers from the UK seeing Spain as a good place to earn a quick buck without regulation who convinced clients to falsify papers, take loans they could not afford or use dodgy valuations to get in mortgage funds for more than the property was worth. These activities have sent the finance market in Spain for genuine buyers into turmoil making any application now very difficult to obtain. This is due to a high delinquency rate of mortgages with clients who have no embedded interest in the property in terms of their own cash and properties worth less than the mortgage amount. The banks in Spain are now so pedantic on applications that arranging a mortgage has become an unnecessarily onerous task even for quality clients.

Taking a mortgage in Spain is different to UK the whole process from application through to securitisation does not reflect the UK. Again many clients have fallen foul because they have either made big assumptions of how it will work or have been badly advised or have gone to banks direct who do not explain clearly or in English exactly how the mortgage will work in the longer term. In fact again the Spanish Mortgage market is clear, understandable and its idiosyncrasies known to any broker who is experienced and takes the time to protect the client fully. This means just like the UK the broker should take into account the legal issues surrounding buying a property, land classifications and be able to explain to the client fully the implications of any actions they are planning to take.

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Changes To Spanish Property Valuation Rules

Tuesday, June 9th, 2009

In May this year, the Bank of Spain and Spanish government passed a new rule that reduces the validity of valuation reports from 6 months down to 3 months.

This change is a reflection on the volatility of values of properties in Spain and the Bank of Spain’s requirement to ensure that loans do not exceed acceptable loan to values.

No bank can now accept or complete on a Spanish Mortgage without having a formal valuation, which is less than three months old.

Timing therefore of undertaking valuations will have to be much more closely monitored to ensure completion of purchase is likely to happen within the three months or the client will suffer having to instruct and pay for another valuation.

It will be impossible to get this right every time as many issues can affect completion dates in Spain even when it appears reasonably clear completion can take place within given timescales.

The new rule should not affect valuations already undertaken as each valuation report stipulates a validity date. Certain banks however may chose to take a different view and insist a new valuation takes place if current one is more than three months old. What is in fact law and what criteria the bank then insists on does not always match.

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