fixer

Just thought the forum would be intrested in how you release equity to purchase a second property in Tenerife if for say you had aprox 100,000 euros equity to bank valuation and outstanding mortgage this probably one for C.I.M or maybe janet david

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Apartments in Cristian Sur, Tenerife Sur and San Marino

C.I.M

100,000€ equity to bank valuation? Can you explain that please?
Generally, you look at the last valuation of your property (for example - €100,000 and can release upto 70% of this - so €70,000.
Is that what you mean?

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Janet

CIM's your man, David, not me!

fixer

i mean the valuation is 180,000 and outstanding mortgage is 80,000

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Apartments in Cristian Sur, Tenerife Sur and San Marino

ainsie

I would read this as the difference between what he owes and the bank valuation... in this case 100,000. I know it does not work like this as you said. Its a percentage against the total valuation that you can have mortgaged.

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fixer

hi tom your right just asked the the question to clear up what way equity release works in a spanish bank david

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C.I.M

OK.
Here is how you work it out:

(Valuation x 0.7) minus outstanding mortgage.

So in this case (180,000 x 0.7) minus 80,000

or 126,000 - 80000 = equity available for remortgage €46,000

There are costs involved - approximately 4 to 5% of the remortgage figure (€126,000).
Some banks may cover some costs otherwise you use the following calculation assuming average costs of 4.5%:

(Valuation x 0.7) or 180,000 - costs = €120,330

€120,330 - €80,000 = cash out of €40,330.

Costs vary depending on the redemption figure from your current bank and the opening fee of your new bank.

Also, rates for remortgages are slightly higher than purchases.

On the loan to value I have a couple of lenders that will go to 75% Loan to value. Doesnt sound like much but can make a difference. In this case the cash out would increase to €48,925
Which bank you use ultimately depends on which one is going to do it for the least money.
There is also a difference in terms and conditions between non-residents and residents and sometimes it depends on what you are going to do with the funds - ie: loan consolidation etc.

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fixer

so what if you want to purchase another property what the best way to do it the origanal property is self financing with accounts to prove david

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Apartments in Cristian Sur, Tenerife Sur and San Marino

C.I.M

If you have accounts to offset the current mortgage payments then they may be considered by the bank. However, if you declare your first property, then your second purchase would be viewed as an "investment mortgage" as opposed to a "holiday home" mortgage.
Consequently, you would only achieve 60% Loan to Value from most banks and rates may be higher to reflect the commercial nature of the loan.

There are sometimes ways around this but it depends on the individuals circumstances.
Sometimes equity release is the best option, sometimes not.
I would approach your bank who you currently have your mortgage and see what they will offer you.
Then, consult a mortgage broker and see if there are any better options.

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TonyB

It is my understanding that there is no such thing as a second mortgage in Spain.

You will need to approach your current lending institution to consider a full remortgage of your current property.

You may wish to consider approaching a new lender but you will first have to check to see if there is an early redemption penalty with your existing lender.

Leeds and Barclays are currently pushing first mortgage lending for property purchase and remortgages. Leeds are offering 5.74% linked to EURIBOR (European Interbank Offer Rate) and you can choose Interest Only or Capital Repayment for the entire term and they will lend up to 70% LTV (loan to value ratio).

There is approx 2% of advance set up charge, solicitors fees and valuation fees which are based, generally on the value of the property.

If you need any further information, please feel free to PM me.

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