Expats
Many expats living abroad who are UK passport holders or come from other countries may be wondering what will happen to them post Brexit should they choose not to return at some point to the UK, or do not earn their incomes in the currency in which they need the loan.
Banks in Ireland and UK have of recent withdrawn from giving expat loans to citizens living abroad because of new credit directive mortgage rules which make it complicated for the lender to offer a loan in a currency in which the borrower does not earn their income.
The regulation changes have not affected the ability of Spanish Banks to continue to offer non resident loans.
Many issues are not clear at present for longer term living but what will not change is that buying a second home in Spain will remain a choice for Brits and that a Spanish loan can be applied for in order to make the purchase.
Having lived put of the UK for many years expats living and working in the Middle East the far East or Africa have no desire in retirement to return to the UK. Having been used to a warmer climate and low or no taxation a move closer to home but not in the British Isles is a good compromise.
Living in Spain
Spain has long been a destination for those who have worked abroad who wish to get closer to Europe and maintain a lifestyle more conducive with the lifestyle they currently have.
Due to changes to taxation in the UK for those working abroad which prevents them from living in the UK for the previous 180 days without attracting tax many offshore workers have elected to hold a UK home, and a Spanish home so they can manage their rest periods between working without having to declare the tax free incomes earned in any other country.
Spain only requires you spend lees than 180 consecutive days in the country for an individual to be declared non resident and avoid any tax obligations in Spain.
Tax systems
For expats living in jurisdictions where a tax system applies the Spanish Banks will treat the Spanish mortgage application in the same manner as they treat an application from someone based in the UK. The key criteria will be that outgoings on credit payments should not exceed around 35% of net incomes and the net incomes will be calculated as those incomes shown on their tax returns.
Loans in the country in which they are working will be assessed by provision, from the applicant, of a credit file. Most Asian countries like Singapore and Hong Kong have Experian or Equifax or a similar provider, as do China and a number of the African countries.
Along with supplying a credit file to confirm debt outgoings from where they currently live any UK passport will also need to provide a credit file from their country of birth. If the expat has been out of the UK for more than 6 years or has no financial links back in the UK at all, a page from the credit report providers stating “no data found” must be supplied.
Loan applicants who live in the Middle East have a slightly harder job proving incomes and debts to a level where the Bank in Spain can prove to their regulator they have undertaken full due diligence on both where the income is sourced from and that affordability can be met.
UAE residents applying in Spain
Most Middle East countries like Saudi Arabia and the UAE do not have a personal income tax system and many do not have credit files, the normal documents required for a Spanish Loan.
If the applicant is employed then work contracts and pay slips and bank accounts can verify incomes and their validity. In the absence of credit files a reference from their Bank must state what debts if any are held, and what level of monthly payments are due. The reference will also need to confirm the loans are held in good order with no late or missed payments.
Any Bank reference must be in Spanish or English to allow the Spanish bank to assess it or must be officially translated into Spanish if it is written in Arabic.
Self Employed
For self employed applicants owning a business in the Middle East a mortgage in Spain is still possible but far more extensive paperwork will be required when making an application.
All businesses in the Middle East must register with the government each year so verification of ownership of the business and its turnover can be officially proved. A self employed applicant can expect however to provide a much higher level of monthly bank statements, usually minimum of one year and can expect the underwriting process to be longer.
Loan to Values
In general expats living outside of the UK can except to gain slightly lower loan to values than those living in Europe and it is very rare for a full 70% to be offered. Anyone living and working outside Europe should work on a basis of 60% loan to value although occasionally 65% might be possible.
Mortgages in Spain are however available for all applicants even those in non tax paying jurisdictions despite the fact that if you live in a country where a tax system exists it is only taxed incomes the banks in Spain will assess. Proof that you are legitimately not in a tax system is always required.
Brexit affect
Post Brexit it is not envisaged the treatment of British expats will change when it comes to buying in Spain and contracting a home loan. Whether finally you will be able to settle full time in Spain remains to be seen.