Can you get a Spanish 'Buy To Let' Mortgage???

Hi Guys, i'm really looking for Smiley's help here but anyone with info will be greatly welcome & appreciated!

I'm looking at buying a Spanish Bar, but one with a sitting tenant on a 5 year renewable lease. Now I have heard that if you are not resident in Spain then you can only borrow 50%, and as I am still in the UK I am wondering if you can get similar to the buy-to-let mortgages were the amount you can borrow depends on what income you will get from leasing the bar rather than your own income. This is a very recent idea i have had so know very little about the whole thing so please forgive my ignorance!

As I said any help would be greatly appreciated...

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If you are trying to contact Smiley, why not email him?

His email addresses are in his signature on all his posts but I have copied them below for you.

Noreen

patrick@marbellamortgages.com  www.marbellamortgages.com 

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That concept does not exist legally, in a technical sense, in Spain. I guess you are talking about  mortgages provided  by the lenders on consideration of the letting possibilities of the house. Is not?

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Hi TD the concept as you know it of Buy to Let does not exist in Spain whatever anyone might tell you. Social laws protecting tenants here will have to change dramatically for any lender to ever consider the risk as viable. On a long term letting contract (similar) to the UK a tenant can claim rights for up to 5 years to stay in the property if they are compliant with the tenancy contract. Thus if a borrower were to default on a mortgage and the lender wished to repossess they would have to evict the tenant from the property which could prove very difficult if they are in a position to invoke their tenants rights. Spain is a very socially aware country so I have to say I cannot see that changing in my lifetime - and currently I plan to live a good few years yet (God and the Devil willing!!). Many external lenders to Spain have looked at ways round this over the last few years promising with a fanfare that they will be introducing a BTL product for Spain - whether this is what has held them back or not I cannot say but I am sure that it will have been a major factor when they have been doing their research and diligence into this currently unexploited market. To be honest most lenders here assume that a non resident will let the property for some of the time - what they will not do is factor rental income into debt to income ratios for affordability.

In your particular situation you would not be looking at BTL anyway. If it is a bar then it would be a commercial mortgage. Bars and restaurants have the highest rate of business failure in Spain and generally speaking the maximum you can get is 50% whether you are resident or not as commercial lenders deem them to be high risk. Taken into consideration would be the rental from the bar and the lender would also want to be able to see the books of the bar (which generally in my experience do not make good reading - well the ones that are available) - most bars/restaurants seem to optimise their profitability which I guess is great for the pocket but perhaps not so great when it comes to being assessed for a loan. Hope that answers your question.

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Very interesting summary Smiley but I thought I had read recently that the Spanish Government were considering changing these tenant protections to encourage the owners, both Spanish and non Spanish to let their empty homes

From 1919 to circa 80's in UK residential tenants had protective rights but to encourage private landlords these were relaxed and the outcome was that we now have in UK an active residential letting market

I understand the Spanish government are now moving to a similar view

Perhaps someone who follows local Spanish political news could provide some information on this subject

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Hi Brian it will be interesting to see if Zapatero does do something along these lines. Wihtout doubt the Thatcher Govt initiative introduced better protection for Landlords - largely protecting against sitting tenants, controlled rents and continuance of tenancy for family members etc. Without the introdcution of the ASTA I doubt the UK would have seen the introduction of the BTL mortgage as we know it in the UK. Let us not forget that Spain is a country that is fiercely protective of its social values and after so many years of Dictatorship it would possibly be seen as one more erosion of those values and more protection for the "wealthy" property owner. Whether they are wealthy or not, it is how it will be perceived. Any debate I think would be fiercely contested and while the socialists have an upper hand I suspect nothing is likely to change (now that I have said that they will rush through legislation next week!!). Personally I think it would be a good thing as it opened up the market in the UK but it took a right wing govt to do it. Cant ever see the likes of Healey, Benn, Callaghan etc being in favour of such a scheme as it was so far from their own alleged "values" - notwithstanding the fact they were all reasonably wealthy property owners themselves (just a bit of added flavour to open a can of worms)!!!

Nonetheless it took quite a while for lenders in the UK to introduce more viable mortgage products for the new Landlord on the block in the way of BTL. In the current climate in Spain where all is gloom and doom this is likely to take longer still. Indeed if products are introduced whether they will be made available to non residents will be another matter entirely. Again I hope it does happen but the speed at which traditional practices change in Spain is not exactly Mach 1 so I think for the foreseeable future it is unlikely to be on the cards.

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