What are some of the best options for private loans in Spain?

Often our clients need to borrow money in Spain, rather than taking out equity release on their homes. The Spanish banks are just not interested in giving loans to expats while using their home as a guarantee. They will not do it.

This fact opened the door to private shadow banks and even just wealthy individuals willing to help the clients who are crying out for liquidity.

Of course, they do it in exchange for a profit, just like the banks would. Clients can be surprised to learn that private investors charge set up fees, legal fees, notary and land registry costs, just like a bank.

Interest can be high, and you absolutely must get legal advice before entering into any of these arrangements.

JJC will help to make it easier for you. The rules and laws are quite restrictive in Spain, but we have found some excellent options for our clients and we have highlighted a few of them here.  Both funds and individuals are handing out private loans to expats, who can secure the loans with their properties.

Deals can be done quickly, once we have the correct information.

 

MORTGAGE LOAN, where the property is in the name of a Spanish company.

This is the preferred method of lending in Spain for the investors. The legalities are easier, the costs lower and the protection for both parties is greater.

Effectively there are three types of loans to SL companies that we have brokered for our clients:

  • Principal + Interest – monthly instalment.
  • Interest only – monthly instalment and the principal is paid at the end of the loan term.
  • Principal + Interest is paid at the end of the loan term.

General Conditions:

  • Maximum Loan To Value: 30%
  • Interest rate: this can be high, 10% is a good average.
  • Opening fee: 3- 6%. Often this includes notary fees, translations etc.

Restrictions: (not many!)

  • Loan To Value: 30%. This kind of LTV is standard.
  • NO MORE RESTRICTIONs, ONCE THE HOUSE IS IN THE NAME OF A COMPANY.

Documentation we need to process the loan or to get you an offer:

  • Exact address of the Spanish house.
  • IBI receipt.
  • Information about debts on the property.
  • Copy of the NIE and Passport.
  • Photos of the house, which we can present to the investor.

 

MORTGAGE LOANS FOR an individual, who needs MORE THAN 50.000€ and they have a property worth OVER 300.000€

Type of operation:

  • This involves the sale of the house, and the owner has the legal option to repurchase it in the future.
  • In this case, you literally sell your property to the investor, but you retain the right to buy it back. You need to be clear however, just like a Spanish high street bank, if you don’t buy it back within that stated period, the investor will, naturally, repossess it.
  • We find this service is suitable for a person who needs to buy another property, or perhaps an investment property.
  • Perhaps they have an immediate problem like a bankruptcy or even a divorce/bankruptcy.
  • The client must be aware that one day, the loan needs to be repaid, or they can lose their home.

General Conditions:

  • House is purchased for a maximum value of 30% of its market value by the investor.
  • Option to repurchase usually in 3 to 4 years.
  • The repurchase Price is approx. 35% higher than the price it was initially purchased by the investor.
  • Seller stays in the property paying a rent of 4%-6% interest of the purchase price.
  • If the seller does not repurchase the house during the option to rebuy period, he loses the house. Some clients are happy to walk away having had their short-term solution of course.
  • The seller can always find a third buyer that buys the house over the repurchase Price agreed, and the surplus over this Price is for the seller.
  • Let’s say that the repurchase price is 100,000 euro on your 350,000 Spanish home. In four years, you decide that you don’t want to buy it for whatever reason. You have the option to sell it to a family member or even a third party. If he buys it for 300,000 he gets a bargain, the investor gets his 100,000 returned and you get a large sum of money too. (very general figures, please talk to us and / or your financial advisor)

Restrictions:

  • Maximum purchase Price: 30% of the market value.
  • House has to be worth over 300.000€.
  • Owners should need more than 50.000€.
  • If there is a mortgage over the property, this must be lower than the purchase Price (a maximum of 30% of the market value as informed in the previous paragraph).

Documentation we need:

  • Exact address of the house.
  • IBI receipt.
  • Information about debts over the property.
  • Copy of the NIE and Passport.
  • Photos of the house.

 

PRIVATE MORTGAGE LOANS for individuals needing less than 50.000€ without limitation on the market value of the home. 

Type of operation:

  • The investor pays the client the amount he needs by signing an option to buy contract in the public notary, recognised by the Spanish land registry.
  • This gives them the option, quite literally, to buy that property at an agreed price for an agreed length of time.
  • During this period the client has the opportunity to pay back the loan, by paying the stated amount plus an interest rate to the investor.
  • The option to buy the property will then be automatically cancelled.
  • Clients need to be aware that if he/she doesn’t pay back the loan and clear the amount during that period of time, then the investor simply buys it for a maximum of 50% of its market value.

We had one deal where this happened, but the investor allowed the clients to remain there as paying tenants, with a dramatically reduced rent.

General Conditions:

  • The money paid initially is the smallest amount between 25% or the value of the property or 50,000 euro, whichever is lowest.:
  • Period to execute the option to buy/period that has the client to pay back the money plus interest is usually around 4 to 6 months.
  • Interest rate over the amount received by the client: to be defined by the headquarters. Every case is different so we can´t say upfront how much interest rate it is.
  • We must evaluate first the documentation provided by the client.
  • The amount received + the interest will be paid all together at one time.
  • If the client doesn’t pay back the amount during that period of time, then the investor buys it, generally for a maximum of 50% of its market value.

Restrictions: 

  • Maximum purchase Price: 50% of the market value.
  • No restrictions in relation to the market value of the house.
  • Owner needs less than 50.000€.
  • If there is a mortgage over the property, this must be lower than the amount we are going to give him initially.
  • This particular offer is aimed at and suits people who need a cash flow solution now, but they are aware that they will receive money from elsewhere soon.
  • That source can be the sale of another property or an investment for example.
  • Clients need to be knowledgeable of the risks associated with using their Spanish home as a guarantee for this kind of equity release option.

Documentation we need:

  • Exact address of the house.
  • IBI receipt.
  • Information about debts over the property.
  • Copy of the NIE and Passport.
  • Photos of the house.These are some of the options available on the Spanish private lending market right now.

Clients expecting the high street banks to offer the same services that they are used to in markets like Ireland and the UK are often shocked at how limited their offers really are.

If you’d like us to talk you through your options, please get in touch and we can have a chat. We provide finance options to people all across Spain and the islands

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