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Hi, new to this site, residing in UK and could urgently do with others’ input please:we have the opportunity to pay off half of our Spanish IRPH Euro mortgage, which has been running for 9 years of a 25 year term. The exchange rate is great but we have major concerns re the current economic state and downgrading of banks in Spain and don’t want to risk potentially losing the money if Spain ‘goes bust’/leaves Euro etc.It is all the great unknown and we are not risk takers but leaning towards doing it! Any thoughts, comments, advice gratefully received! Thanks in advance.
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Where is this money that will be used to pay off the Euro mortgage??
If it’s in sterling in a UK bank then you would be foolish to pay off the mortgage. The exchange rate is only going to get better over the next few years, if Spain does in fact need a bailout or leaves the Euro.
The other point to bear in mind is your interest rate on your Spanish loan. Mines is 2.9%, I could pay off my mortgage in it’s entirety but I don’t for 2 reasons
1) I earn more interest than 2.9% in the UK, so in effect my UK savings interest pays my Spanish debt interest.
2) The fewer assets I have in Spain the better. I am much happier knowing that most of my wealth is in the UK and not Spain. If something exceptionally bad were to happen I least the Spanish bank will have taken some of the loss and not me. They can then come and chase me here in the UK (exceptionally bad = war, breakdown of Spanish society, Council knock apartment down etc etc).But this is what I do, you need to make up your own decision about what is good for you.
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Where is this money that will be used to pay off the Euro mortgage??
If it’s in sterling in a UK bank then you would be foolish to pay off the mortgage. The exchange rate is only going to get better over the next few years, if Spain does in fact need a bailout or leaves the Euro.
The other point to bear in mind is your interest rate on your Spanish loan. Mines is 2.9%, I could pay off my mortgage in it’s entirety but I don’t for 2 reasons
1) I earn more interest than 2.9% in the UK, so in effect my UK savings interest pays my Spanish debt interest.
2) The fewer assets I have in Spain the better. I am much happier knowing that most of my wealth is in the UK and not Spain. If something exceptionally bad were to happen I least the Spanish bank will have taken some of the loss and not me. They can then come and chase me here in the UK (exceptionally bad = war, breakdown of Spanish society, Council knock apartment down etc etc).But this is what I do, you need to make up your own decision about what is good for you.
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Thanks jp1 for your thoughts – very useful input and valid points – the money is in sterling in UK and you have mooted points that were in the back of our minds but as days pass, have become more prominent! Cheers for crystallising them.
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Thanks jp1 for your thoughts – very useful input and valid points – the money is in sterling in UK and you have mooted points that were in the back of our minds but as days pass, have become more prominent! Cheers for crystallising them.
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Hi, we may have the option to pay off our Spanish mortgage and then have more income out of pensions to go and retire there, but I have read that there are charges/taxes on this.
We know we will pay 0.25% to the bank on redemption. Is that all? If other costs how much?
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Hi Holly.
Since I first made my posting re paying off part Spanish mortgage we thought long and hard, weighing up all sorts of pros and cons – then the euro/sterling rate improved greatly and we decided that for us – maybe not everyone – we would take the plunge and pay off half on our next visit to Spain – after ensuring with our Spanish bank that this would not be problematic.Sent money to Spain in tranches to Spanish Bank from my UK account, via Hifx as I have always dealt with them. We visited the bank on our next trip to Spain, having forewarned them of our intent, then simply sat down with staff and the money was immediately transferred to the mortgage account. Yes we had to pay a % but were well aware of this since the inception of the mortgage. We had no other costs apart from this.We have now reduced our mortgage by half and thus remaining mortgage payments are also enormously reduced on the remaining capital. Feels marvellous! We realise it could still all go pear shaped but weighing up our personal circumstances and costs/benefits of worry etc,this has worked for us. It was so easy too.If I had to make the decision again I would do exactly the same! Hope this helps a bit. -
Horses for courses as they. In addition to what JP1 said. One has to keep in mind
a) If some has lent me the money at a good rate in the past. I will not pay this off because if I now or in future need the money. I will have great diffculty in finding a lender.
b) The outstanding amount of the mortgage will also reduce your tax liabilty.
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Absolutely Shakeel – horses for courses! As I said, it works for us – paying part mortgage off.We all have very different circumstances and can only make individual decision based on our own lives/problems/health/age and of course money availability.We unexpectedly came into some money and it was also more cost efffective FOR US to part repay than to have it ‘floundering’ in UK account of any type.Good luck with it all to HOLLY
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@farigola: indeed & I am delighted that in your set of circumstances it works for you.
As the forum is used by people with differing circumstaces and I am sure you are well aware of this and as such a broader & general approach is always taken by me in my postings.I knew that you had taken the decision that you needed to and as such my comments were for general consumption.
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and paying off half a mortgage would be cheaper than clearing it totally. I would have guessed that clearing half wouldn’t have incurred any costs at all (apart from money transfer costs?). I bet the bank manager was beaming like a Cheshire Cat!
Clearing the whole mortgage incurrs the repayment charge (our mortgage is 1%) and the notary costs etc. to update the deeds to say that the property is clear of debt.
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