Taking a Spanish mortgage in name of a Company
Over the last few years the benefit of company purchases, so buying property in Spain in a company name has diminished. Most buyers look to buy in a personal name. Never the less for some purchasers, buying in a Company name remains the right route. Mortgages in Spain for a Company purchase, have some limitations and specific requirements. One key reason for considering buying and borrowing in a Spanish SL, is if you earn incomes in a currency not covered by lenders in Spain.
- Company ownership of a Spanish property, can have benefits. For instance If the property in Spain is to be used to generate an income from regular rentals.
- In addition to overcome currency of earning issues
- Allowing running costs to be offset against income.
- Also to obtain rebates on some Spanish taxes like IVA.
- Since the economic banking crisis in Spain many Banks have withdrawn Mortgages in Spain for a non resident company purchase.
- Spanish Mortgages for a Spanish SL are more widely available
- Mortgage in Spain often have higher Bank arrangement fees.
- Also interest rates are higher than for a personal name.
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Why are Spanish Banks of loans less likely to grant a loan in a Company name
Files for loans granted in the name of a Company, are always more likely to pulled and scrutinized. In the event of a Bank of Spain audit. Firstly for money laundering or tax evasion checks. Secondly files must show higher levels of due diligence. Making therefore Company loans for mortgages in Spain more complicated.
- Legislation dictates the Bank is required to confirm each year the Company remains financially viable.
- In addition that it has no infractions, or bankruptcy proceedings taking place.
- The repossession process can also be more complicated.
- Particularly where the company owning the property is a trading Company.
- Furthermore is a non resident company.
- For risk purpose. A higher level of funds for a company mortgage in Spain are required to pass to Banks balance sheet. Compared to loans in personal names.
Buying property via mortgage in a resident Spanish SL
Spanish Limited Companies can obtain a mortgage Spain. It is normal for the SL to be dormant. Created solely as a holding structure for the asset. Banks in Spain look more favourably on structures that include an SL. A wider range of Banks will consider a loan on this basis. Rather than where no SL is involved.
- The loan is granted to the company
- All shareholders of the SL must act as guarantors
- A Spanish SL must have a minimum of 2 shareholders
- Affordability will based on the personal situation of the shareholders, and normal criteria will apply
- The SL must be set up before a mortgage application can be made.
- Monthly, yearly tax returns, and accounts will be necessary, even if the SL only holds an asset.
- Expert advice should be taken on the cost of setting up and running a Spanish SL
- Maximum loan to value may be limited to 60%, also a 15 year term
- Company loans can overcome access issues for clients who earn in currencies not covered by non resident Spanish Banks.
Buying and a loan for a non resident company
Purchase of Spanish property in a non resident company is possible. The company can be an existing company. It can be a trading company, but also a new company set up solely to hold the asset.
- The non resident Company can either hold the property directly, or via a Spanish SL company. That in turn holds the asset.
- In order to both buy, and arrange a mortgage for a non resident company, the company will require a non resident fiscal number in Spain.
- For individuals this is the NIE. For companies this is a CIF.
- The Articles, deeds, shareholder certificates are required for obtaining the CIF.
- In addition, certificates from government departments. Confirmation the company is set up according to the law.
- All of the documents will have to be translated into Spanish, and hold the stamp of the Hague Apostille.
- A minimum of one of the shareholders, of the Company, will need to have Power of Attorney. Allowing them to act on behalf of the company. in all matters relating to the purchase.
- NIE certificates are also required for all shareholders. Because they must act as guarantors.
Risk process for assessing a loan in a Company name
The Spanish loan deed is recorded in the name of the company. As the company is the legal owner. However the financial data by which the Bank will assess the loan will rest on the personal guarantees. Including all of the shareholders of the Company. Loans granted based on the Company’s fiscal position are not possible.
- Most companies owning property in Spain are just holding structures.
- Mortgages for companies will be assessed against personal incomes of owners.
- Therefore not performance of the Company itself.
- Any documents for the mortgage required for the application will reflect this.
- Guarantors are personally liable for loan payments.
- It is not possible to use a Mortgage in Spain to buy the shares of an existing Company. A Spanish mortgage can only be raised to directly buy the property.
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Due diligence on Mortgages for companies
Because the loan is in the name of the company, but the risk assessment is in the name of the guarantors, the level of documentation and due diligence is always high. For the application process The paperwork will need to cover off all the legal aspects of the ownership structure, the fiscal viability of the Company, and all the personal debt and income information of the individual owners.
- All deeds and certificates showing incorporation of the Company and the owners, stamped by the Apostille, for nonresident companies, will be required for the application.
- In addition the CIF certificate, whether it is a non resident company or a Spanish SL
- The Financial data, if the company is trading, including 2 years accounts and a balance sheet.
- Corporate tax returns, where company is an existing or a trading company.
- Company Bank accounts are required, where applicable for last 6 months showing fiscal activity
- All shareholders will be required to present their personal documents. Including ID, tax returns, credit files and bank statements.