Comparing options: new mortgage or equity release back home


Should you use a Spanish mortgage, or a mortgage on your property at home? There are various good reasons for using a Spanish mortgage as opposed to a mortgage taken out on a property at home (in the UK, for example).

It makes sense to have the asset (the property) and the liability (the mortgage) in the same currency. This helps to minimise one source of uncertainty and risk (the Euro-Sterling exchange rate).

If you plan to rent out your property, and use the income to help finance the mortgage, then it makes sense to have you monthly mortgage repayments in the same currency as your rental income.

The interest rates on Spanish mortgages at present are lower than on British mortgages, and are expected to remain lower for the foreseeable future. This means that monthly mortgage payments are likely to be lower with a Spanish mortgage.

On the other hand, Spanish mortgages have higher set-up costs than mortgages in the UK, what with all the notary fees, registry fees, taxes, and other administrative costs described in the previous section on Spanish mortgage costs. So if you only need a mortgage for a few years, it might make financial sense to use a mortgage taken out in the UK.

On balance, and especially under the present economic circumstances, most people will be better off taking out a mortgage in Spain, rather than using a mortgage on a property elsewhere to finance the purchase of a property in Spain. This might not be the case for everyone who wants to buy a property in Spain.