Financing your purchase
It’s a good idea to establish how you are going to finance your purchase of a property in the Javea region before embarking upon your search. As well as helping you to define a budget for your purchase, this will also allow you to act quickly should you find the perfect property at the beginning of your search.
There are various different ways of financing your dream property abroad. A purchase in cash is obviously the most preferable and if you are fortunate enough to have sufficient cash funds at your disposal to buy a property outright then this will put you in a strong position for negotiating a favourable purchase price.
If the cash you hold is not in Euros and is in your local currency instead, then we strongly suggest you pay careful attention to the exchange rate of the Euro versus your local currency prior to completing your purchase. Maximising the exchange rate you achieve on such a large sum could potentially save you thousands on the final purchase price.
Also, plan just how you are going to convert your local currency into Euros. Many people rely on their high street bank to handle the exchange but these banks often have uncompetitive exchange rates and expensive commissions so look into using a specialist currency exchange (Forex) company such as MoneyCorp.com who not only generally have a more favourable exchange rate and fee structure, but also allow you to lock into a fixed exchange rate (up to a year in advance) so you will know exactly how many Euros your cash sum will generate.
If you are not in the fortunate position to finance your purchase entirely in cash then you will need some sort of loan and this is normally in the form of a mortgage. There are a number of different ways in which our clients raise mortgage finance.
By far the most common method is to remortgage your main residence. This is generally the quickest and easiest method of raising finance and the fact that many of our clients are approaching or have indeed reached retirement age, most have sufficient equity in their homes to allow a significant release of equity. As well as being relatively quick and easy, this method allows our clients to avoid long-term currency risks. In other words, the repayments remain the same, regardless of fluctuations between their local currency and the Euro. The only variable being the interest rate attached to the mortgage and the loan amount.
Another popular option is to approach a bank in your country of residence for an Overseas Mortgage. As well as having peace of mind in terms of the currency fluctuations, it’s often much easier dealing with a bank that speaks your language and if any difficulties arise, they should be easier to resolve. However, there are disadvantages following this route. Quite often the interest rates and fees are much higher than you would pay on a mortgage for a property in your home country. Also, overseas mortgage providers are less likely to be so stringent upon due diligence checks upon the property you are purchasing. However, it’s definitely an option worth exploring.
Finally, there’s the option of applying for a mortgage in Spain. This is certainly worth looking into as interest rates in Spain are some of the lowest in Europe.
Loan to value ratios are typically higher in Spain (requiring a higher deposit) than they would be in your country of residence and initial fees can be higher. Spanish banks also set strict lending criteria in terms of affordability and they will conduct the same due diligence upon your financial situation that any bank in your home country would.
If you are planning to rent out your property in Spain then this may be a further advantage of obtaining a mortgage in Spain. The rent you will receive will in most cases be in Euros and this will avoid any currency exchange commissions and fluctuations being incurred.
Please note this is simply a guide to financing your purchase of a property in the Javea area. We strongly recommend that you seek the advice of an independent financial advisor to advise you of the best option for your circumstances. We know several reputable mortgage brokers in Javea who we have worked with for many years, so if you would like us to recommend someone, please get in touch.