Financing luxury property in Spain

If you plan to purchase luxury property in Spain, it may be interesting to resorting to external financing. This article will discuss the financing options of luxury property in Spain.

A classic home loan

Let's start with the classic option for financing a second residence: a home loan. Here, you (re)take out a mortgage on a property in Belgium. A classic home loan goes through your Belgian bank.

This financing is less suitable for higher-end properties because of the limited possibilities.

Please note that a Belgian bank will usually request a draft of the notarised deed of sale of the Spanish home before effectively disbursing the loan. In Spain, this draft is drawn up only a few days before the deed is executed, so the funds cannot always be transferred in time. Notify your advisor in Spain in advance that you have taken out a loan so that preparations can be made.

A Spanish mortgage

An alternative to the home loan is a Spanish mortgage. Spanish banks generally allow you to borrow up to 70% of the purchase price. However, this form of credit is expensive. Not only are the Spanish interest rates higher, there are also more transaction costs. For a Spanish mortgage, you can contact Spanish banks or a mortgage broker in Spain.

Read more about a Spanish mortgage.

A international mortgage credit

In the case of an international mortgage loan, the mortgage is established by a foreign bank on the property property in Spain.

This form of financing is usually only available for the purchase of luxury properties.

However, the terms are more interesting than a classic home loan or Spanish mortgage. In addition, you can also opt for a bullet formula.

An international mortgage loan is basically granted to a company. You then acquire the property through a company.

Read more about buying with a company in Spain.

An advance on securities

With an advance on securities, you invest a certain amount with your private banker. In return, you can borrow on flexible terms, without notary fees. Your investment portfolio then acts as collateral for the loan.

Thanks to its flexibility, this form of financing is also highly suitable for high-end properties. Moreover, an interesting loan-to-value is possible and your investment portfolio will bring in income. In combination with an international mortgage loan, it is possible to borrow more than 100% of the purchase price.

Tax benefit of financing?

Financing can also result in a tax benefit. For instance, there is a wealth tax in Spain, even for non-residents. From the time you have net assets in Spain greater than 700,000 euros, rates between 0.25% to 2.5% are applied. Through financing, you can reduce your net assets and thus pay no or less wealth tax.

Update December 2020: the highest rate will be raised to 3.50% for net assets above €10 million nationally from 2021.

Read more about wealth tax in Spain.

Do you have questions about property financing in Spain? Then feel free to get in touch.

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