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Mallorca - Domizil
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last update: 1/2008
Also in Spain one is able to partially finance one's real estate. The Basis: to conserve the holiday feeling, to permanently escape from the usual working day to an own finca or apartment with a view of the sea - the dream of millions of Germans. About 40.000 Germans seriously entertain the thought of buying real estate in Spain yearly - either as a holiday apartment or as a permanent home. He, who does not have sufficient funds, dreams on or has the home of his desire financed through a building society. Potential property financing companies are easily found. Local as well as foreign banks are found at every street corner. The first question the potential property buyer should ask himself: To which bank will I go? The first option at hand will be to approach a local credit institute, be it a Spanish one or a subsidiary of a foreign one. No need to fear the language barrier. Many banks in the holiday resorts have not overlook the great client
potential and often employ German speaking staff in their credit department or co-operate with German banks (e.g. on the Balearic Islands "Sa Nostra" with the a Savings Bank Duesseldorf und the provincial building societies). Should one prefer a German partner, can also turn to one of the renowned building societies. The finance of foreign holiday flats or real estate is a fairly new field for the local building financers. Since the realisation of the local market the banks and bank societies have increasingly bent their mind to property financing in the E.U. and the United States. Nevertheless, the financing of private foreign real estate does still not make up for the larger part of the business for most credit institutes. Our German business banks prefer to finance industrial objects and the building societies, which are only permitted to finance private objects are (so far) only re-presented fairly meagrely.
The "LBS", "Heimstatt" and BhW are intensively advertising their Europe activities, whilst other well known companies like "Wuestenrot" or Schwaebisch Hall" are noticeably holding back. Whether bank or building society, the potential real estate buyer will soon realise that there are three important prices: The first is the actual purchase price, the second is the price entered in the land register and the third is the estimated property price. All three of these prices may greatly differ from each other. The bank will finance only 60% of the estimated value of an object (even if the applicant shows a good credit reference). Seeing that the aforementioned value may deviate from the actual purchase price, the buyer will be faced with a financing deficit. Or in reverse: there is an increase in the required privately owned capital. Potential buyers should always consider this and make the provisions for it in their financing plans. He who plans to lend the money from a German building society must expect to pay at least 40, if not 50 % of privately owned capital - based on the estimated value of the property. Interest: The German banks charge fixed interest rates, whilst the Spanish banks usually work with variable interest rates. The fixed-interest-rate option
is surely the more reliable one. On the other hand, the interest situation in Spain is currently quite interesting. The decision for or against a fixed or variable interest rate is in the end not a matter of taste but a question of the international market situation. It is in any event wise to deliberate over the various types of finance in advance. Currently it seems to be advisable to opt for fixed interest rates over a long period. The Contra-argument: For years the experts have advised "secure fixed interest rates now, it cannot become any cheaper". They continued to drop steadily. Once a certain bank has been chosen, the formalities have to be full-filed. Every credit institute demands sureties, every credit applicant (with a few exceptions) has to present proof of income as well as other collateral. With regard to the afore-mentioned it is irrelevant of the financing institute. Spanish banks will also accept German Life insurances and certificates. There is however an advantage, should one own property in Germany; should you put the property up as collateral the German banks will finance up to 100% of the estimated property value. Be cautious of finance mediators who make too-good-to-be-true offers. Every serious institute will advise his clients of possible risks involved, when financing a holiday real estate.

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