In a desperate bid to shift thousands of repossessed homes in Spain, one bank is offering 100% mortgages with a 13% cash back to expat buyers.
Effectively, the bank is offering 113% mortgages on newly built apartments and villas across Spain, while an investment company is advertising 110% deals.
Banco Popular is offering the deal – and has worked out the figures apartments on the market ion the Costa del Sol.
A two-bedroom apartment is selling for £68,000 – with the offer of a 100% mortgage and a £8,840 cash back.
In the same resort, a four-bedroom apartment selling for £172,000 also comes with a 100% mortgage and cash back of £22,360.
All the homes offered with the special mortgage and cash back deal are repossessed properties from developers who went bust during the recession.
The mortgage rate tracks Euribor (Euro Interbank Offer Rate) plus 0.9% for the first 12 months, increasing to Euribor plus 2.39% from the second year onwards.
The current 12-month Euribor rate is 0.201%, making the introductory rate of 1.101%.
The Euribor rate is based on the rate several European banks set for lending money to each other.
“The bank wants to move these properties off the balance sheet, so is prepared to do a deal,” said Marcus Wainwright, a Cost del Sol estate agent.
“Banco Popular agreed some big loans before the crash and has suffered because property has lost around 50% in value since and the debt far outweighs the value of the property.
“It’s sensible to cut those losses – especially when the pound is so strong against the euro and British buyers are looking for property bargains in Spain.”
Warning from estate agents
Expats warn against taking such large loans against the properties.
“Some of these developers went bust because they built homes in the wrong places and could not attract buyers or tenants,” said estate agent Simon Conn.
“If you want to live in one of those homes, then the deal’s a good one, but if you are looking for an investment, the nature of the borrowing and the location of many of these properties mean you are unlikely to see a significant return on your cash.”
Estate agents also point out that a massive over supply of unsold homes are pulling prices down across Spain, and that the market will not pick up until these homes are sold.
Another point for buyers to watch is buying fees can add 15% to the purchase price of a Spanish home, which wipes out the value of the cash back.