Looking through my emails I found this very interesting article from Spanish Real Estate website www.realestatepress.es which I decided to translate as I think that, if you´re thinking of buying a property in Spain, you might find interesting…
What follows is a direct translation of the article, which you can see in its original (Spanish) form here: http://www.realestatepress.es/MostrarNoticia.asp?M=0&Id=19551
The hidden face of buying properties direct from a bank
It’s not all benefits with the mortgages banks offer to buyers willing to purchase one of the properties held by the bank. While they may offer 100% mortgages, its usually on properties with a higher selling price than the actual market value of the property.
Generally, banks offer longer repayment terms than with standard mortgages, offering a maximum of 40 years compared to the usual 30-35 years offered to buyers of non-bank held properties.
Payment terms are also usually flexible, with the banks often introducing “periods of grace” and the buyer can also save the cost of a property valuation as this has already been carried out by the bank!
With so many advantages, what possible downside could there be? In recent times, we´ve seen an increase in the cost of mortgages, coupled with the infamous (land clause) (eg if you can no longer pay your mortgage, you´ll loose your home but keep paying the mortgage) and the mortgages usually carry higher interest rates, set usually at the Euribor plus one percent.
Don´t forget that while you are effectively financing the entire value of the property with a mortgage, you will still need an extra 10% to cover the various costs associated both with the purchase, and setting up the mortgage.
Property choices are also pretty limited to the portfolio held by the bank, with the majority of properties resulting from seizures and therefore of questionable conditions.
As the properties on offer are not new build but properties which have already had at least one owner, the property is not subject to Spanish VAT but the ITP tax, meaning buyers miss out of the recently reduced VAT rate of 4%.
Finally (and possibly most importantly), these properties are usually priced above the actual market value, with banks fixing the price to balance their books and usually without taking into consideration the depreciation of the property.
What the article doesn´t mention but which is of equal importance when thinking about buying a property, especially one abroad, is that you are buying the property from a bank, not a builder with a complete and integrated after-sales services such as that of TM Real Estate Group.