Currency Risks for Expat Buyers of Spanish Mortgages Could Rise says Mortgage Direct, Citing CaixaBank and Bankia Merger


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It is expected that the merger of CaixaBank and Bankia will be formalised by March 2021, a development that could bring with it some difficulties for those international and expat buyers looking to take out a Spanish mortgage.

According to Spain and Portugal mortgage provider Mortgage Direct, any merger will not have a significant impact on mortgage borrowing or interest rates, but they may see a change in the currencies accepted.

The developments are therefore raising the risk of potential currency uncertainty for those international buyers seeking to take out a Spanish mortgage.

The merger between CaixaBank and Bankia comes after a similar joining of Sabadell and BBVA was called off.

Mortgage Direct says changes in the banking system may result in the exclusion of certain income earners owing to currency-related risks, although the're hoping changes will be minimal.

In some instances, Mortgage Direct are bypassing the currency problem by placing the mortgage outside Spain, with a bank in Andorra.

"We were recently able to help a client whose income was paid in Mexican pesos – a currency not currently accepted by Spanish banks for mortgage purposes," says Katherine Walkerdine, Founding Partner & Business Developer at Mortgage Direct, in an email briefing.

By transferring the custodial ownership of some of his shares to the Andorran bank, he was able to borrow the required mortgage amount.

Another option is to set up a Spanish S.L. (sociedad limitada or limited company).

"We had a client receiving their income from Kazakhstan and whilst they can’t borrow via a traditional Spanish mortgage, in principle they can borrow through an S.L.," says Walkerdine. "It is important to note though that setting up an S.L. is time consuming (can take up to 6 months) and incurs additional costs - around €2,000 to set up plus the ongoing costs of submitting quarterly accounts."

While the UK situation looks bleak with lockdown currently in place across the whole nation and travel bans in place for the foreseeable future, Mortgage Direct report a "surprising" spike in activity, and this has been backed up by a few of our collaborators.

"It seems that some of our UK clients had been waiting for a Brexit deal (which has now been agreed) and other international clients (as well as the British) feel confident to pursue their dream home while prices are still low, now they know a vaccine is on its way," says Walkerdine.

Whilst there is more price haggling going on, Mortgage Direct have not yet seen prices fall to the extent that was predicted.

Although some clients are happy to purchase via virtual viewings, many prefer to wait until they can travel again.

"In the meantime, it’s encouraging to see clients keen to start the formal mortgage application process," says Walerdine.

Find out more about Mortgage Direct here.