Tenerife Mortgages and Property – May/June 2010 update

We have seen the number of completions increase significantly year-on-year for both March and April, which is very encouraging and hopefully this trend will continue with Spanish banks loosening their criteria and approving more mortgages in Tenerife and Spain

There are still plenty of reasons why those interested in purchasing property in Spain are maybe not doing so. With all the talk of the Greek debt crisis and the possible effect it may have on the economies of Italy and Spain, a lot of speculators are biding their time. Unfortunately unless they know what kind of market signal they are waiting for they could be hanging around missing the best of the market!!!

Many commentators are of the opinion that property prices have bottomed out, although due to the weak Spanish economy, high unemployment and the vast surplus of new housing units we may not see a recovery for a number of years. It remains a difficult time, but the Spanish Government is predicting economic growth will increase each year for the next 5 years, which would provide some stimulus to the property market. For investors looking for capital growth on property, there may not be a better time than now – it goes without saying that you simply cannot know when the bottom of the market has arrived.

Tenerife sets itself apart from Tenerife somewhat by having a much higher rental “season.” A good holiday property can easily attract 40 weeks per year – some up to 50. The difference in income is staggering when compared to the far shorter 4 month season in Spain. As such prices simply have not fallen in Tenerife as they have in mainland Spain and are unlikely to do so. If you are waiting on a great holiday property to come on the market you won´t do much better than this one:

Granada Park apartment, 60,000€ reduction, 100% mortgage

With massive leverage from the 100% “super mortgage” and the fact that the complex is a touristic Apart-Hotel designed for the holiday industry, if 1,000€ per month rental income doesn´t whet your appetite – then nothing is going to – you may as well give up now!

Aside from the Super Mortgages we alone can achieve on repossessions, standard mortgages in Tenerife are currently set at:

Maximum borrowing:

• Fiscal Residents 80% of purchase price
• Non-residents 70% of purchase price

Interest rates:

• Best: 2.10%
• Average: 2.6%
• Poor rate if you let an estate agent do it: 3.5%

Euribor rates:

• 1-month (monthly) 0.413%
• 3-month (quarterly) 0.663%
• 6 month (half-yearly) 0.968%
• 12-month (annual) 1.236%

(Most mortgages are based on the annual Euribor with a loading of 1 – 1.5)

One question we are asked a lot is whether Spanish banks are relaxing their lending criteria. We have yet to see many banks increasing their LTVs – a few have but they were low to begin with so 50% to 60% for example is not much to get excited about.

There are signs that certain banks are looking to increase their overall lending though We have noticed that larger loans (€500.000 plus) are being given priority and whereas in previous months it has been more difficult to get these approved, we currently have 4 mortgages in excess of 500,000€ being underwritten and fully expect them to be signed within the next month.

Estate agents insisting on arranging your Spanish mortgage

Some banks are still changing criteria on a regular basis and this is where using a bona-fide mortgage broker really pays – we know the market, we know what these banks are doing and are alerted as soon as a change takes place. We can therefore avoid wasting clients time – something estate agents (who continue to offer poor, poor advice) simply cannot do. In fact our number one enquiry last year (52% of ALL enquiries) was from non-residents who had arranged a mortgage through their estate agent which was expensive, had unforeseen clauses or for one of many reason was simply unsuitable. They were all wanting to switch to another lender – something which is now very difficult in Spain. it doesn´t seem to matter how many times we tell people to seek professional Spanish mortgage advice – they still get smooth talked by a property salesman into signing up to terrible products with terrible conditions.

Cambio de Casa (Change of Home mortgage)

If you are unable to sell your current Spanish property, but are desperate to buy another property then good news, we work with a bank that will lend 100% plus fees and taxes on the new property, provided that the loan size is not more than 60% of the value of both properties combined (the one the clients own and the one they want to buy). You could for example borrow the cost of the new property, plus the fees and taxes (approximately 12%), plus an additional €20.000 to build a swimming pool.

Repossessions and 100% mortgages in Tenerife

We have recently read on some Tenerife Estate Agents website that repossessions in Tenerife are a waste of time. “They do not exist” or “only horrible properties in horrible areas” and other such nonsense. The truth is – they DO exist, they ARE worth considering and you CAN borrow up to 100% to purchase a property with over 40% off its original asking price. Our repossession listings are proof of that. The real problem many estate agents have is that we are professional mortgage brokers, part of the largest mortgage group in Spain and have excellent relations with many banks. Estate Agents on the other hand – do not have such knowledge connections or relations to access such deals. As such they will find it very difficult to source such properties and arrange 100% mortgages on them. If you are interested in repossessions and distressed sales – stick with the experts here on this site. Our listings are here: Tenerife repossessions and distressed sales and we are constantly updating them.