The UK Mortgage rates might help your Spanish property dream.

The easiest way to purchase a Place in the Sun is a CASH PURCHASE ... allowing 12% on top of the agreed price for fees, tax and extras. 

I hear on the news that Mortgage rates in the UK are at " all time low" so now is the time to think about taking equity out of your Uk house to fund at place in Spain or abroad .  What do other think about doing a purchase through this method as the Lenders will lend the money provided you can pay back the monthly fees, and they are not interested in what you spend it on ? a motorhome or a place in the sun ? 

Any downsides we havnt thought of with property prices and a  buyers market.?.

Hi Aliton, that's exactly what we did.

Plus points:

1. It's quick.

2. It's simple (assuming your UK lender agrees).

3. It's cheap (no mortgage arrangement fees etc).

4. For us it was really the only way given we were building a house in Spain and it would have been really hard to get a mortgage on a plot of land with plans for a proposed house.

5. Depending on when you execute the transfer, you can maximise the FX element (i.e. switch into Euros when the rate is good). 

6. Given that arranging the funds this way is quicker, you can generally move faster - if you need to. As a general rule Spanish banks are a lot slower than they used to be in approving loans - with good reason given many have had a lot of defaults from the days they fell over themselves to lend money.

7. You don't have to keep finding the monthly repayments in Euros each month, instead it's all wrapped up in the UK outgoings.

Negatives:

1. Taking a Spanish mortgage although expensive to arrange does give you addtional comfort as the lenders are usually quite diligent about making sure the property is all above board - although your lawyer should do this too, it's never bad to have that addtional comfort.

2. You are more exposed to the the FX. By this I mean you have an asset valued in Euros should you need to sell, against a liability (mortgage) in GBP. Of course this could work to your favour depending on rates at time of sale and outstanding mortgage amount versus house price value at that time). For example, if you purchased a house in Spain today for € 150,000, using the rate today you may pay about £131,500 (plus fees). If the rate moved against you

One important point, if you do decide to borrow in GBP, it helps to have an offset mortgage. This way you can pay for the purchase in tranches and any GBP left in the account can be offset against the UK mortgage. This was especially important for us having a house built as we paid in set stages. But even to buy an existing house this works well as thenyou couldave the funds in the UK account  in Sterling,ready to move quickly once rates are at a level you are comfortable with, and until then, you aren't paying interest on the addtional funds you've raised.

Last point - ALWAYS use a professional FX house to swithc funds. You can compare their rates with those of your bank and in my experience they are always better. Again there are many of them so shop around. I can give you the name of the company i use all the time if you contact me away from the forum (not sure I'm allowed to give recommendations on EOS.

Good luck, Carl

Not really a cash purchase in the true sense of the word though, only for the person you are buying from.

Lets say the average mortgage in the UK lasts around 25 years, we know many are going to 30 and 35 years, but use the 25 years, lets say you have an outstanding mortgage of £150,000, and not counting some areas of England vary so differently in house prices, and your house is worth £250,000, the house of your dreams in Spain is selling for 80,000€ and you get the extra money to fulfill this dream. You could / might win over the 25 years if you keep both and never sold until the loan finished. Truth is not many do keep to the 25 year loans, for many reasons personal or otherwise. Still has to be paid back whatever.

You now got a house in the UK with a mortgage attached to it of £230,000 that is worth £250,000, and the corresponding extra amount of repayments every month. Plus extra life insurance to cover the outstanding amount of debt.

The Bank of England has appointed a new Governor, just because of what he says now..today...might not what he does in two years time, and should things pick up quicker then this he will change his mind, they do.

Your house in Spain might still drop a touch more yet, but you will still owe the £230,000,  your UK mortgage might go up which in effect is also on a house that may have dropped in price in Spain. Will the UK house drop in value?

The house you bought in Spain hasn't cost you 80,000€ because you paid mortgage interest on it for any remaining term or extended term of your mortgage, in reality this 80,000€ would probably be about 130,000 / 140,000€ at the end.

 What i have said in answer to you is only a fraction of what could happen, to many if's..but's...maybe's... mights...

I have not covered the many other scenarios that are out in the real world... such as losing your job...your health...divorce...what you don't seem to lose in this world is the paying back.

I wont even mention buying a Motor home/Car/Boat and obtaining a loan for these via your house mortgage, now that is crazy, paying back money over a mortgage term..say the 25 years... that will increase the monthly payments increasing the initial cost of the purchase.... while the item you bought drops through the floor in value.

For many this is the only way they can afford the dream......what they cannot afford later is the nightmare.

If this is your dream...Then go for it....Why not?