Our Frequently Asked Questions
Please see below for our most frequently asked questions. Do you have a question not included here? Simply contact us!
- Is insurance needed on my property?
Apart from the fact that we would always recommend that any purchase take out adequate and appropriate insurance for their property, irrespective of whether they take out a mortgage or not, where a mortgage is taken it will always be a requirement of the lending institution that a building insurance policy is taken out with an approved insurance company. Generally good deals can be obtained from the lender themselves. See our dedicated section on property insurance
- What are the costs of taking out a mortgage in Mallorca?
Unfortunately quite significant and sums you certainly you want to be aware of when you are preparing your overal property buying budget. It is also advisable to seek a loan of the maximum amount required, even if you do not "draw down" the fully amount, to avoid duplicating some of the fees in the future should more funds be required
Costs fall into the following categories:
The costs of a mortgage can be summarised as follows: Bank valuation fee; Bank arrangement fee; Stamp Duty; Notary Fees; Land / property registration fees. More specifically these fees are as follows:
- Bank Valuation Fees - Generally based as a % of the valuation of the property (around 1%) but as a rule of thumb around 400 - 800€ although amount may rise on larger properties.
- Bank Arrangement Fee - Generally between 1% and 2%. In most cases we hope to agree levels nearer 1% than 2% for our clients.
- Stamp Duty (in Spain known as Impuestos sobre Actos Juridicos Documentados - literally "tax on legally registered documents" - Usually 1% of the loan amount.
- Notary Fee - These are at established rates based on the amount of loan. More specifically - 68€ plus a sum of between 0.023% and 0.034%. Please note these fees are in addition to the Notary Fees required for the actual property purchase ie their is a fee for each document registered - property deeds and mortgage deeds.
- Land / Property Registry Fees - Again established rates equivalent to 18€ plus a percentage of between 0.015% and 0.13%
- Can I make lump sum repayments during the mortgage?
Yes all banks will allow this although the costs can vary considerably between 1% and as high as 4%. This is an important area of negotiation at the time the loan is taken out in order to avoid potentially high hidden redemption costs in the future. The same can be said for the costs of full redemption / early cancellation of the mortgage.
- Is there any difference between a mortgage for a resident and non resident?
The quick answer is yes! Generally a loan to a non resident will not exceed 70% of value (sometimes this can increase to 80% although generally the "additional" 10% will be charged at a higher interest rate. Loans for residents can be 100% or sometimes as high as 120% to cover the costs of purchase, moving etc. Often the interest rate charged will also be less so it is important to decide whether you wish to be regarded as a resident or not (there are strict rules to assess whether an individual can be legally and financially regarded as a resident. You should discuss this with your lawyer or Gestor if you are in any doubt.
- I have heard that mortgages can be transferred on the sale of a property. Is that true?
Unlike in the UK a loan in Mallorca / Spain is granted on the property, not to the individual although an assessment of the individuals ability to repay the mortgage is of course made. This therefore means that when a property is sold it is quite possible to take on an existing loan on the property. This may have some advantages in that the set up costs are avoided although ultimately the decision should be based on the terms of the mortgage (interest rate, redemption penalties etc) as any savings from avoiding the set up costs may be quickly wiped out if the interest rate is much higher than that obtainable from another bank.
Tel. +34 661 560 284 Fax eMail info@mortgagesinmallorca.com
