Financially complex buyers
For many years Banks in Spain have struggled to meet the needs of the financially complex mortgage applicants.
This is particularly true for those who reside in countries where it is possible to have tax mitigation products which are not available in the Spanish system and therefore are not understood by the Spanish Banks. This may include for instance Trusts which are not a legal entity in Spain
Sophisticated lending products which allow applicants to manage effectively their money rather than buying and using all their liquid cash do not exist via the standard lending market.
Having a loan may have some IHT benefits which is another reason why some cash buyers would look for lending.
Most International lenders like Jyske Bank, Nat West, Barclays Wealth and Credit Suisse once active in the Spanish mortgage market have withdrew some years ago for dealing with Spanish loans and have not come back into the market place.
Re-financing and equity release via the traditional Spanish Bank route has not been available for many years.
Swiss banking solution
In September 2017 a Private Bank based in Switzerland launched into Spain a product aimed at the high net worth market.
The borrowing facilities are for both purchases, re-mortgages and the release of equity for applicants who want to release value form their owned Spanish property to gain investment income.
Normal affordability ratios applied by Spanish Bank and traditional documentation required to prove affordability are not the key focus of the lender. The lender is looking for the right profile client who can form an investment relationship with them within their Private Banking managed funds.
Mortgage Product options
The Bank will lend up to 100% by way of a combination of security of the property asset in Spain and a further 50% secured against cash and investments held within the Bank.
This facility is available for purchases and equity release.
The Bank currently offers 3 fixed rates at 50% loan to value being
· 5 years at 1.5%
· 7 years at 1.8%
· 10 years at 2.2%
For equity release the maximum initial term is 5 years. It is possible at the end of the 5 years to look at re-negotiating a deal.
The lending is broadly interest only but a minimum of 5% of the Capital must be paid back each year. This can be taken from the income generated by the money under management.
The new lending facilities cover Madrid, the Balearics and Marbella areas currently
Lending Criteria
Up to age 65 as standard.
To qualify to apply for lending facilities the loan applicants during the mortgage application process must pledge a minimum of € 2.5 million in the Bank.
The loan to value is dictated by the lowest of ether the purchase price or valuation and tow valuations take place one paid for by the client and the other paid for by the Lender.
Minimum purchase price or value must be CHF 2m which is around € 1.8 million at todays exchange rate. Maximum purchase price is CHF 20m.
For equity release any monies released must be placed with the lender. The applicant will be appointed an adviser to discuss investment options based on preference and risk profile. There is no option for taking cash out.
Neither the applicant or ownership entity can be Spanish. This precludes any properties being bought in or held in a Spanish SL.
Other ownership structures such as Offshore companies are acceptable and most nationalities subject to due diligence can be accepted as applicants.
No property being utilized for any commercial use including rentals are acceptable.
Conditions of the loan
Early redemption penalties are applicable if there is a loss to the Bank at the point the loan is redeemed. This would be the case if for instance you redeemed when rates were lower than they are now.
Bank arrangement fee are lower than the traditional 1% at 0.50% of lending.
If security is taken of the property other costs like ,loan deed tax and notary and land registry fees still apply.
For lending against cash under management many of the costs can be avoided as no security is taken over the property.
Investment Portfolios
The Private Bank has an array of managed portfolios and funds. Clients get a bespoke service and remain involved in the decision making of what type of fund or investment is made with their cash contribution.
The cash held can be adapted to meet the requirements of the borrower and during any period of borrowing the capital will not be accessible to the client.
If a loan of more than 50% loan to value is requested the lender will require cash on deposit or invested to exceed the amount of the property purchase value.