Switching our Spanish mortgage to a British one

Has anyone switched their Spanish mortgage to a British one and if so what do they think, we have had our Spanish mortgage for 5 years and it has recently increased to the point where we are considering if it would be worth our while to try to switch it to a British one, we have an appointment in April with our solicitor in Spain and this is one of the questions we want to ask him but just wondered if anyone had already considered this and if so can they give us any information.  Many thanks

I don't know anyone that's done it but I'm not sure how it would work.

I would expect you would have some notary fees and mortgage cancellation fees that you would need to take into account.

And would a UK bank give a mortgage on a Spanish property?  What would happen if you left the UK and stopped paying the mortgage.  How would the bank repossess the property if it's in another country?

This is one of the reasons why Spanish banks don't generally chase mortgage debtors overseas.  As one Spanish bank director told me "what would we do with a house in Liverpool?"

Have you spoken to your bank and checked whether they would actually go ahead with this?

Justin

Also, without wishing to pry, why have your mortgage payments gone up? The majority of Spanish mortgages are tied to the euribor which at the moment is nosediving. It´s the cheapest it has been in almost a year. Some are predicting a rate of 1.35% by the end of this year, I can see it going lower than that. That, along with the pound being a bit stronger than it has been recently, should have made mortgage repayments cheaper, not more expensive.

 You could try taking it out with one of the British banks that trade here, like Lloyds/Halifax for example.  Alternatively, you could approach your UK provider and then use that money to pay the Spanish one off.

However, I don't think you'll get one cheaper with a UK mortgage provider as, as stated, the rate in Spain is very low.  If you took out your original one when it was 1.50 or so to the pound then it probably doesn't seem like that.  

thank you all x

In reference to Bobs post Lloyds (there is no Halifax any more) is in fact a Spanish bank. In order to lend in Spain a finance house is required to have a Spanish banking licence. In terms of getting a UK bank to lend - you could release equity from your UK property via your UK mortgage lender and redeeem the mortgage in Spain but the UK lender cannot secure on your Spanish property so they would not do it.

Remortgage in Spain is horrendously costly which is why there is little or no remortgage market here (typically 6 to 7% of the advance). In addition any new offer has to be more competitive than your existing lender or the existing lender can refuse to switch the mortgage across. Lloyds have a subrogation product which covers the vast majority of costs although in practicality the margin above Euribor is so high that it would be unlikely it would beat your existing lender.

I am inclined to agree with Scout that there should be another reason that payments have risen other than rate. Perhaps you have reached the end of an interest only period.

Hi all

Just picked up on this thread and it is something I have been thinking about.  However what I was contemplating doing was to actually make an offer to the bank to settle the mortgage by using a UK remortgage on our property.  By this I mean if the current mortgage debt was 200,000 euros make an offer of 150,000 euros, does anyone know if this is feasible, any info would be appreciated.

Regards

Dean 

Hi Dean - I suspect the bank in Spain is unlikely to accept a lesser amount to settle the outstanding debt - and certainly not 50,000 light - you can certainly ask them but I cannot think of anything that would motivate them to do that

Thanks for the reply Patrick

The figures quoted were probably a bit optimistic, but what I was getting at, is it likely you could negotiate with the bank in this way.  Obvioulsy I am not upto how the banks are working in Spain at the moment but from my point of view I would of thought it would make sense all round, with the bank receiving the majority of their funds. 

Regards

Dean

Hi Dean - I am no mortgage expert and I'm sure Smiley will tell me if I am wrong, but I believe that there is always an early redemption penalty , if you want to pay off your mortgage here.  Mine is 1%, so they would want an extra 2,000€ from you, not offer you a discount!!

Always worth a try though! - and let us know if it works!

Hi Dean - as Claire says most lenders apply an ERC on their mortgages in Spain and subject to lender and when the mortgage was taken out this will range from 0.25% of outstanding balance upwards. If you consider the logic of the situation - in the UK if you were maintaining your monthly payments on a mortgage and owed your UK lender £200k and went to them and said "I will pay off my mortgage but only give you £175k".........what would you expect their answer would be? In the 0.0000000000000000001% chance they accepted your proposal how long would it be before others thought they would try the same ......... leading to massive losses for the bank that has loaned you the money. It would be no different in Spain.

In fact assuming you had financial problems and were unable to make the payments in the UK you have more chance of them accepting a lower figure to settle the debt than in Spain. However this would be after you had gone through various procedures ultimately ending in bankruptcy - assuming the lender hadnt decided to repossess in the meantime.

As Claire says nothing ventured nothing gained - and you have nothing to lose by asking but I am 99.999999999999% certain you will be met with a negative response.

Thanks again for the info.

From what you have said I guess the banks are not that accommodating.  If the euro continues its rise I may remortgage in the UK and see if the bank will waive its early redemption fee I am sure this is more likely something they would consider.

Regards

Dean

 The early payment of a mortgage should be simple.  Ours states that there is no charge for paying off part of the mortgage but a 1% fee will be charged on the balance of paying it off in full.  If you have a €50,000 mortgage, pay off €49,900 in one go with no fee.  Then pay off the balance of €100 with a fee of €1.  However, transferring the mortgage to a UK bank may be taking a gamble with the exchange rates.  At the moment, the pound looks fairly strong.  This month our mortgage was £30 less due to the pound being higher.  Also mortgage interest rates in UK vary from about 3.9% to over 5% - some will give you an initial lower fee but this may only last the first year.  Our rate through a Spanish bank is 2.5%.  

As Bob says sterling is stronger than it has been for some time so while any £'s raised in the UK would buy you more Euros to transfer you need to do your sums carefully and take into account what interest rate you are currently being charged against what you would be charged in the UK and the fact that monthly transfers from the UK to pay the mortgage in Spain will purchase more Euros - that said these are uncertain times and f/x markets more unpredictable according to who is going to publish the next bit of bad news.

As to the early redemption penalty - very very few lenders operate the facility for partial early repayment that Bob mentions and historically it was only something introduced in recent times so that element depends on a) who the lender is and b) when the mortgage was taken out so check your mortgage deed and ensure you are fully aware of the terms.

If they agree to waive any of the charges written into the Deed you should consider yourself very lucky.

Hi Elain and Chad

Hi Elaine and Chad

As far as I can see it's not a matter of switching your mortgage from one bank to another. In reality you would need to get a British bank that was willing to give you a mortgage on a Spanish property. Then pay off , and, cancel the mortgage with the Spanish bank with the money from the British mortgage, Quite simple, in theory. Although, I don't know how willing a British bank would be to give you a mortgage on a property in Spain. Maybe if you still own a property in the UK it would be easier.