1) Purchase. It goes without saying that a significant percentage of people buying here cannot purchase outright for cash. For whatever reason, they do not have access to the necessary capital and therefore, irrespective of age, they will need assistance in funding.

Now there are various types of purchasers
i) The investor or speculator. They will want the cheapest, most economical route to acquiring property so, with mortgage finance available even to non-residents up to 80% and perhaps more, they will not need to use their own capital and the lender will help carry some of the risk.

ii) Holiday Homes. A lot of would be retirees sample the country by buying a property here whilst retaining their main home as well as their jobs back in the UK or otherwise. With easy access to mortgages back in their own country it is tempting to borrow against the main home but I would question the danger that goes with that. Better to put the finance for an investment property on the same.

iii) Retirees. This is self explanatory and most people in this category would look to buy for cash. But why would you do that when you have a risk for Inheritance Tax, currency exchange and the potential to earn a greater return on your capital than borrowing in euros. More on these points to follow.

2) Inheritance Tax (IHT). It is dangerous to blow this issue out of perspective but is perhaps more dangerous to ignore it without understanding the current risk that all purchasers should be addressing.

What is certain is that for property purchasers here, the issues of IHT and the necessity of a Will should be a critical part of the initial planning. Having said that, time is normally on your side but, if you have a property here and have no idea how best to structure a defence against inheritance laws and tax in Spain, then best you do something about it sooner rather than later.

Inheritance laws in Spain are dramatically different than say, in the UK. Many people assume that European states are similar in this respect. Wrong! In fact, the UK is somewhat unusual in offering attractive allowances whereas the same is not said elsewhere and certainly not in Spain. There is no spouse exemption on the main home and personal allowances are small and fall to the beneficiary rather than the deceased. So there is a real need to understand and plan or you (or more to the point your beneficiaries) could get a nasty surprise.

3) Low Euro interest rates. The current average euro mortgage pay rate is little more than 3% whilst, at least for , returns on capital are in excess of 5% without taking any investment risk at all. Now, if we take an example of a purchase here for say Euro 200,000 (130,000) the difference EVERY YEAR is at least 4,000 euros or 2,700. So, if you utilise the Interest Only tool and defer the repayment of the mortgage capital for say, 20 years, that amounts to a massive 80,000 or 54,000! Wow!

4) Foreign Currency Exchange rate risk. Now there is the threat of exchange rates moving against you in the above example, but the same can also be said if you purchase your asset (your property) with no liability (your mortgage) to mitigate an exchange rate risk, especially if your capital base and income is in another currency (). Investors worldwide (and I am talking multi national conglomerates) use the offset mechanism all the time rather than running complex and risky financial exchange rate products such as Foreign Currency Futures and Options. These cost money with potentially a nil return. You can do it simply by reducing your own capital and borrowing via a mortgage.

5) Equity Release or Eventual inheritance. My experience in working in the Financial Services markets for the last 15 years has led to an odd conclusion; far too many people, parents in fact, pay far too much attention to their detriment in trying to create an eventual inheritance for their children.

By that I mean that too many folk do not enjoy their capital to the extent that some more selfish people might. They live their lives and use their money for themselves rather than scrimping and scratching in order to pass the family home onto their kids with no mortgage liability. This is somewhat unusual in the British and, on the one hand, is applaudable but on the other crazy, especially if, by using careful financial planning, more can be made of limited capital.

As a parent, I believe that you can only do so much and there has to be a balance, especially later in our lives when income diminishes. It is at this stage, that we should be starting to bring the kids in on the inheritance planning we are making for their benefit.

Lets take a couple of examples
Many enquiries that we receive fall in to 2 camps; releasing equity for property enhancement (pool, garage) or perhaps to live an easier life and then , secondly, concern over inheritance tax and its implications on the kids.

Equity Release. This will involve a mortgage secured on the property and, in part at least depending on how much capital is released, has the potential of mitigating IHT. Sensible planning. But why should the parents pay the mortgage cost, especially when it can be arranged on an Interest Only basis and cost as little as 250 euro for 100,000 borrowed! Chances are that the beneficiary of the estate, the kids, will be earning more than the parents now, so why shouldnt they pick up the tab?

And the same applies for inheritance planning. A common solution is a life assurance policy written in favour of the beneficiaries, the kids again. This will provide cash to pay the IHT due rather than trying to avoid it. The kids get the house free of mortgage, tax and headaches, all thanks to careful planning by the parents.
Now such a policy costs money every month, and perhaps will be an expensive outgoing for the parents. So why should they pay? The kids likely earn more and can split the cost between them. They should look on it as a long term savings plan for what they get back, the parents home, and the value of that, or even the inheritance tax element, is probably many times they would pay in premiums!

It may be that I am harder nosed than most in this philosophy. It comes from the many years working with ordinary folk. But I see too many people, some distraught to the point of tears, with their concern that their lifetime efforts is locked away from them and later will be under attack from the tax man. They think they can do nothing but, more often than not there is a solution, albeit that pride has to be swallowed and the kids brought into the equation.

So there we have it! Some examples of why, for the majority of people owning property and have their homes here in Spain, that there is a need to have a mortgage in euros. If you have any issues arising from this article we, at Rose FS, are available to assist you.

One final footnote! The areas I have listed of concerns are simply that! They are issues to address and overcome. They are not problems so there is no need to worry! Invariably a solution can be found.

Mark Mountney is a partner in Rose Financial Services, a specialist mortgage brokerage based in the Parque Comercial, Mojacar. He is a fully qualified mortgage and financial adviser in the UK with some 10 years experience in managing his own firm. Mark was also a founder of The Association of Mortgage Advisors, the trade association for mortgage intermediaries with 13,000 members.

In Spain, many purchases are made “off the plan”. This refers to buying property that is not yet built. In Spain, you usually work with developers who have scaled models, or drawn plans to show you a property that will be available to purchase.

In fact, they may even have a show home made available to give you an idea of what it will look like.

Upon the completion of the sale, the sales consultant and the estate agency will get a commission on the property sale value. This makes a very advantageous to purchase “off the plan”, because you can save a lot of money.

In addition, Spain is a wonderful opportunity to invest in property developments. A property development usually consist of several different properties and designs such as pools, gardens and other facilities. Here, the option is to pool your money with other investors, and purchase a piece of property within the area of development.

Some benefits of buying property and Spain include the option of saving by buying “off the plan”, and taking advantage of the tourist season. You can rent out your properties to tourists for six months of the year, and use that money to live the rest of the year in France for free!

The main drawback with buying property in Spain is that you often face a hard sell. There are so many different real estate agencies out there who are competing for your business, and will use high-pressure salesman techniques.

You will come across many trained and competent lawyers, but their skill will vary. When buying property, you may feel that a real estate agent is good enough, but a real estate lawyer can provide you services that go beyond purchasing decisions. This is especially true when there is a property dispute. Considering the amount of the investment involved, you will need the services of an extremely competent person to review the facts and understand clearly where you stand. According to the laws of the state, he will build a watertight case, handle the paperwork, court procedures and work for the best possible settlement. There is a lot of investment involved in real estate, and you need to ensure the right person for the job. Don’t just settle for any lawyer that your friend suggests. The lawyer may be nice and well meaning, but you need to focus on the persons track record and reputation. You must ensure that the lawyer has specific skills dealing with real estate cases.

Also, keep in mind that an expensive office and a flashy car is no guarantee that the lawyer is competent. Your lawyer should have the patience to listen to you, provide personalized services, have a thorough knowledge of the law, and effective communication skills to put his or her point across.

Atlanta real estate lawyers can be found through a referral service provided by Georgia State Bar Association, the county bar association and other professional law associations. Information is also available in the yellow pages or through search engines like Google and Yahoo on the Internet. You can check advertisements of law firms in magazines and newspapers. Friends and family members are also excellent sources of information.

Legal Restrictions

There are many legal restrictions associated with Thai real estate. They largely depend on the type of property you want to purchase:

Land ??? Legally, no foreigner is allowed to purchase land. They are restricted to owning the physical structures only. The law however does make provisions if you wish to purchase land for development. You could either purchase the leasehold for 30 years with an option of renewal or purchase the land in the name of your existing company. It would have to be a Thai Limited Company though and the funding would have to come directly from the company???s provable income and not you.

House ??? Purchasing a house is slightly easier than purchasing land even though the same rule applies for this form of Thai property as for land. You are not able to hold the land???s freehold at all as it has to be leasehold. If you have a Thai spouse then he or she can own the freehold but in his/her name only as long as he/she can prove that the money used to purchase it was not yours.

Condominium ??? The Phuket condominium ownership process is the easiest to understand by far because there is no land involved in apartments or Phuket condominiums at all. Foreigners can own up to 49% of condos in any given block. .

Thai property is cheap in comparison to property elsewhere, which is a major plus point. Sales over the past 7 years show that the yields for investment purposes are very high.

Purchasing Procedures

If you do wish to purchase Thai real estate or Thai property then the purchasing procedures are relatively straightforward as long as there is no land involved. You have to prove that you have enough income to cover any mortgage that you may have or buy the Thai condominium or house outright. You also have to produce documents to verify your identity, nationality, right to be in Phuket and plans and land searches if you are proposing to build your own property.

Funding

Until a few years ago, it was impossible for any foreign national to obtain a mortgage to fund the purchase of Thai property and so would have to buy the property outright or via a business. That is not the case today. Bangkok Bank was the first banking institution to offer a mortgage loan to foreigners wanting to invest in property in Phuket. You can borrow up to 70% of the Phuket condominium or house value. However, approval is dependent on the production of your passport and/or?? ID card of your spouse, reference letter from your current bank, bank statements for the last six months, a credit report, a letter from your employer confirming your salary or two years accounts if you are self employed and any other documents they may request.

Speak to any of our staff in Phuket about the procedures for purchasing property and the finance options available.