NEARLY half of Spain's homeowners who have a mortgage expect to pay it off before the end of the term, according to a recent survey.
A total of 54% of mortgages in the country were incepted with a term of between 20 and 30 years and a small number are as low as 15 years.
Despite the upsurge of offers of mortgages running for 50 years back in 2007, mainly offered to the under-35s to help them get on the housing ladder due to very high home values, not many existing loans of this nature were taken up.
And across the board, 47% of mortgage holders are confident they will be able to pay theirs off early.
About 26% are not sure whether they will be able to or not, but only 28% were convinced they would need the full mortgage term.
According to the survey by Pisos.com, variable-rate mortgages continue to be the most popular and, in most cases, the most sensible option.
Eurozone interest rates, or the Euribor, which sat at over 5.5% at the end of 2007 is now at around 0.16% and no plans are afoot to increase it.
Any increase is likely to be gradual and with plenty of warning, meaning those who fear their repayments getting out of hand will have time to arrange a fixed rate.
Spanish mortgages are reviewed and revalued annually, which gives homeowners a long breather and time to alter their borrowing strategy if economic factors look set to change.
The 82% of homeowners on a variable-rate mortgage have enjoyed gradually lowering repayments for some years, although the 9% on a fixed rate may have been paying over the odds.
Setting up a fixed rate normally means buying an interest figure slightly higher than that of a variable-rate mortgage, and involves a fee, meaning the potential for extra expense is higher – at times of climbing rates, this could be worth it for security reasons, but now it is likely that the signs would be on the horizon long in advance of a variable rate becoming risky.
And so far, the European Central Bank (ECB) is showing no signs of wishing to increase interest rates – on the contrary, they may even fall further before Europe makes a full recovery.
At the time of buying their homes, 45% were able to make a down-payment of at least 30% of the value of the property, either through savings or through having sold another property with equity.
About 34% had less than this to offer as a deposit, and 21% said they had not been able to save up anything at all before buying.
Only 7% of homeowners surveyed said they had been given a mortgage of 100% loan-to-value or higher, whilst 43% borrowed less than 80% and half of the total were somewhere in between the two.
Surprisingly, given banks' new-found caution over lending, some 47% of valuations for mortgage purposes came out higher than the sale price, and 22% were below this – only 31% of valuations coincided with the amount the home was up for sale for.
At present, many banks are only offering a maximum loan-to-value of 80% of either the purchase price or the market value, whichever is the lower.
Fees on top, where a mortgage is involved, come to around 10% of the sale price, although in some cases this is deliberately overestimated by the legal team and a certain amount will be refunded once the land registry requirements are fulfilled.
For first-time buyers, needing to find such a high deposit is creating difficulties at a time when they would otherwise have found it very easy to get onto the housing ladder – properties are cheaper than ever due to supply outweighing demand, and interest rates in the Eurozone are at an historic low, meaning monthly repayments have been falling consistently for several years.
But a few banks are beginning to be more flexible where they are selling repossessed homes, offering as much as 110% of the sale price to cover the fees.
For second-home buyers, however, the plummeting prices and low mortgage rates are excellent news, and even though rent prices are consistently falling, they still generally exceed the amount of a mortgage on a similar type of property, meaning after tax the owner could still be in profit.
And now is a good time to strike, since the house price free-fall will only last until most of the excess supply is snapped up – once supply begins to fall and starts to level with demand, the investment in bricks and mortar in Spain is likely to start showing a return.
In the long term, and with inflation – and especially with foreign demand for holiday homes coming from countries where the economy is recovering well – today's cheap homes are set to become a very sound investment.
