Along with the Affordability Assessment you will carry out with your mortgage broker, one of the other things you should consider at an early stage is a valuation of the property you wish to buy. With various legal complexities applying to properties in Spain, the property appraisal can be key to having a mortgage approved.
In this article, our team at Mortgage Direct explains what you need to know about property valuations for the Spanish mortgage market.
Why do I need a Spanish mortgage valuation?
Aside from fitting within the bank’s risk criteria, the valuation will form the basis for the loan approval. It will also inform you, and the lender, whether there are any legal issues with the property. These are recorded as ‘advertencias’ (warnings) or ‘condicionantes’, which are more serious conditions that would restrict a bank’s ability to lend until they are resolved. Usually, banks will lend a maximum of 70% of the property value for non-residents, and up to 90% for residents.
Why is the valuation amount important?
Your Spanish lender will decide how much they are going to loan you based on the lower of two figures: the price of the property (as advertised by the seller) and the valuation.
If the valuation comes in much lower than the asking price, the lender will use this figure to decide how much you can borrow for your mortgage.
Bottom line? If the valuation is low, you may not be able to finance the amount you need, irrespective of your borrowing capacity from an affordability perspective.
Are Spanish property valuations similar to actual market values?
Valuations can vary significantly throughout Spain for a number of reasons. We always recommend using an approved company that has a local representative with knowledge of the local market (see below).
In theory the valuation should be very similar to actual market value, although this is not always the case so you should consider a valuation at an early stage if you have any doubts.
Can I choose which company does my valuation?
Yes, the 2019 Spanish Mortgage Law gives borrowers the right to instruct an approved company to carry out the valuation for them provided the company is approved by the Bank of Spain. You do not necessarily have to use the lender’s company although some lenders would prefer you to instruct the valuation through them.
What sort of company should I use for Spanish property valuations?
You can speak to your mortgage broker who can assist you in finding a local valuer. Before you jump in and look online for the cheapest, bear in mind the following:
Spanish lenders will only accept valuations carried out by companies approved by the Bank of Spain. It’s therefore vital to ensure you use an accredited company.
The right company
You would think that since valuations are carried out based on the same principles, there would no difference between one valuation company or the next. Unfortunately, this isn’t the case and you’ll find significant variations in the deemed value of a property from one valuer to the next.
Bottom line? Choose a reputable accredited company with local representatives with knowledge of the market to try to get the most accurate valuation possible. Your Spanish mortgage broker or estate agent can help with this.
Why aren’t all property valuations the same?
Unfortunately, the system for Spanish property valuations for mortgages is far from perfect. It gives a lot of weight to the registered square metres of a property without often considering other factors.
Over the years, we have seen examples of poor valuations that have used unsuitable comparison properties, for example. Valuations can compromise the loan value and by extension, the client’s capacity to buy the property.
Bottom line? The key to a competent valuation lies in choosing a competent valuer.
How can I be sure I’m using a competent appraisal company?
The best way is to trust your mortgage advisor. At Mortgage Direct, we play an important role in the valuation process because we only use valuers from companies we know.
“Since 2006, we have built up a network of trusted valuers in different parts of Spain,” said Katherine Walkerdine, a founding partner at Mortgage Direct. “They have a huge impact on our ability to do our job properly and thanks to their professionalism and competence, we never need to worry that we will get a poorly executed valuation.”