Whilst Re-mortgaging in Spain is possible in general the costs of doing so far outweigh any benefit you may achieve and it is rarely the right advice for you to do so just for getting a better mortgage rate.

Should you require extra funds or need to move to interest only then re-mortgaging can help you achieve these objectives. All loans are trackers and most loans are also linked to an annual review so if you move loan while Euribor rates are dropping you may link yourself currently 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 that is important for you to consider not the current overall rate being quoted.

There are two ways of moving your 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 but 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 lower loan to values from 60% to 65% there are a couple of banks that will either assist with costs of moving loan by providing a cash back at completion or in one instance fully cover costs of subrogation.

These two lenders provide the only true cost effective route to re-mortgaging and both provide interest only facilities and the possibility of taking out extra cash within their loan to value maximums. The cash back lender only provides extra funds for improvements to the holiday home in Spain and does not allow the property to be let out. Both lenders will tie you in for 5 years and any costs covered will be repayable to bank if redeemed before 5 years. After this point both lenders are redemption penalty free.

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

If borrowers are experiencing payment difficulties or your loan to values are above 65% we would strongly advise you speak to your existing lender about your situation rather than apply for a re-mortgage.

Beware any brokers that do not explain the costs associated with re-mortgages as they are unavoidable and in the final analysis will be deducted from loan amount at completion.