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Bank Loans and Mortgages
With the introduction of the euro and the lifting of almost all exchange controls, both residents and non-residents may now obtain loans and mortgages against their Spanish property in any currency from any bank in the world - if they can find a bank willing to lend against prop erty in another country Even very long-term endowment mortgages are heginning to appear, offered by Spanish branches of UK lending institutions.
The good news is the inflation and interest rates are at an all-time thw in Spain. Spanish hank mortgages are now being offered at rates ofless than five per cent, the lowest in Europe. Signs for early 2002 are that rates may be ready to rise, however. The euribor, the base lending rate for the euro, was creeping upward, along with inflation, meaning that banks would soon have t~ raise their rates.
Those people purchasing a second home in Spain may find they can obtain a mortgage in their home country for the purchase of property in Spain. This could represent an ideal solution, hut UK residents in particular must he careful about losing MIHA tax relief on their UK tax when they mortgage to purchase property outside the UK. They will have to pay UK tax on their loan repayments to the Spanish bank should they mortgage in Spain because the Spanish lending bank will not pay these taxes.
Subsidised Housing
In Spain, as in most countries, the government subsidises some types of housing. Ordinarily, this housing is destined for the poor and is offered to them on favourable terms.
Such housing is known in Spain as VPO., or Vivienda de Protección Oficial. You may think that this housing is not meant to help well-to-do foreigners purchase vacation homes, and you would be right. But there are several classes of VPO. projects. One class, operated by the Spanish government, is available only to the poor, who must make a declaration of poverty in order to obtain it.
The other class, more frequently seen, is based on the provision of cheap government financing to the project developer, and these apartments are available to foreigners, although controls are becoming stricter. Purchasers now must be residents and they cannot have incomes of more than about €1,500 a month.
Remember, when purchasing V.P.O. flats, the offer will stipulate that you make a very small down payment, but if you can make a larger payment of €20,000 or so, and thus totally clear the constructor’s own financial contribution to the project, this will be very advantageous. The balance, payable over 15 years or more on favourable terms, will then repay only the cheap government loan and not contribute further to the constructor’s profit.
There are, of course, controls on the resale of such flats, which block speculators profiting at the expense of the government.
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