Tenerife Property – Buying with Spanish Mortgages pt 1

Many non-residents looking to purchase holiday homes in Tenerife with to do so with a Spanish Mortgage. Since the credit crisis back in 2008 this has become a lot more difficult than it used to be far as banks reduced their LTV offerings from upto 100% right back to 70% maximum. The whole process takes much longer and clients who would have easily qualified for a mortgage back in those times would not do so today. Spanish mortgages are “Full Status” meaning banks will want to pour over every details of your financial affairs before giving you a mortgage approval.

Where you need to be very careful is when you NEED a Spanish Mortgage for your purchase. All too often, reservations are paid and deposits are put down before the mortgage has been confirmed or arranged. If a buyer is subsequently turned down for a mortgage, what happens to their deposit? In most cases it is simply gone. A situation we find completely wrong and easily avoidable.

Who receives this money? Why can the buyer not have it back? It is surely not their fault they cannot get a mortgage. So whose fault is it? The banks? The estate agents?

What really matters is if the correct procedures are followed, it is very unlikely you will lose your deposit. In the purchase agreement/contract, if you able to negotiate it, then add a clause stating that should the bank fail to offer a mortgage of sufficient size or should the bank subsequently cancel the mortgage offer, the buyer receives there deposit and reservation back in full – you can also opt for a minimum valuation requirement.

If this is refused by the selling party or their rep`resentative then the best you can do is apply for the mortgage and once you have an approval, order the valuation. If it all comes back fine and your mortgage offer is still on the table, at that point you can sign the contract and pay a deposit.
Something to keep in mind – many agents here have agreements with sellers that should a deposit be paid and then the buyer withdraws and loses the deposit, the agent gets paid – usually not the full amount they would in the event of a sale, but a reasonable amount. The problem here is this can create a conflict of interest when it comes to the advice they gave and some less than scrupulous agents will push and push for a deposit as they know once a deposit is in place – they are getting paid regardless. It is better to lose a property than to lose a big chunk of your money so don´t be pùshged into these situations which put you at risk.

Tenerife Property – Buying with Spanish Mortgages pt 2