Savings, Mortgages and Costs. How Much Do You Need?

We've had a few mails this week from people wondering what they can buy in Valencia at certain price ranges and we have had a few posts about prices in Valencia recently but one thing that comes up consistently is this.

"I have x Euros saved and want to buy a property in Valencia. My price range is between x and y"

And we have to say that no it isn't. Because there are certain things people need to know in order to work out how much they can afford. So in today's post we are going to look at a typical request and what it means for your budget. And we are going to make the numbers easy so you don't have to look away if you find numbers daunting. But there are lots of them.

We are going to assume a few things here. We'll assume the bank will give you 70% of the value of the purchase for your mortgage because that is typical even though at times you may be able to get 80% or even 100% on some bank properties. On the other hand on some properties, for example rustic, you may be limited to 60%, 50% or even 0%. Yep be careful of those rustic properties. You can read why here.

We are going to assume you are buying in Valencia but are not eligible for lower tax rates because you are not a first home buyer under 35 years old too. And finally we are going to look at different levels of savings and for some levels you might be surprised how little you can get. This is because many potential buyers come from countries with different mortgage, fee and tax structures. In other countries you may get a 95% loan and you may have a lower purchase tax so your initial upfront costs will be lower. So let's get to it.

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"I Have 20k Saved"

You cannot buy anything in Valencia. Nothing.

The cheapest property we could find which you are able to purchase in Valencia, i.e, it doesn't have Okupas, isn't VPO (Social housing), isn't Nuda Propiedad (You buy but current owner stays on living there) etc... is 57000 Euros (And i's really an office and we don't think it's residential).

If the bank financed this property for you at 70% then they would give you 39900 Euros. This means you would need to find 17100 euros for the purchase plus 10% tax 5700 euros making 22800 already before adding mortgage costs, notary costs, plus agency costs etc... It takes you well over 20k and that's before you take into account that a property at 57k requires quite a bit of modernisation. So with 20K you can forget it for two reasons; the first being you don't have enough money and the second being the bank won't do mortgages for foreigners for under 50k in general and some won't do mortgages under 100k which is a little inconvenient.

Do you have any options with this amount of savings though? Well yes, funnily enough you do. If you have lived here for a time and you can find one, then a bank property might work, not in Valencia of course, but in some of the villages. Because the bank will give you up to 100% of the property cost meaning you only have to find the costs of purchase, around 15% on the purchase and maybe 1-1.5% of the mortgage cost. However, most bank properties require extensive renovation.

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"I Have 50k Saved"

With 50k of savings you have a chance of buying something outside of the city that's decent but not in Valencia itself. Nope. With 50k, a property of 150k is out of your reach. Why? Because the bank will give you 70% of 150k which means 105k meaning you have to find 45k before even taking into account costs. Costs on 150k are around 16% with a mortgage so 24k. 50k leaves you 19k short. If the bank gave you 80% then it's just about possible. However let's stay with 70%.

A property of 120k leaves you needing to find 36k if the bank gives you 70%. The costs again would be around 16%, meaning 19200 Euros. Therefore you'd be 5200 Euros short. 110k would leave you needing to find 33k and costs of 17600 so if you could get an extra 600 Euros you would be able to buy a flat at 110k as long as it didn't need any work, painting or furniture.

The mortgage would be very affordable over 20 years at just 421 Euros so you wouldn't have to pay much per month and could maybe do all of that work bit by bit.

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"I Have 100K Saved"

Now you are starting to talk but at the same time don't get too excited. A property of 250k which is where we start to get a decent selection in Valencia at the moment would be out of your reach. 70% would be 175k meaning you have to pay 75k to buy the property but bear in mind costs of purchase with a mortgage around 16%. 16% of 250k is 40k and you will have already used 75k in the purchase leaving you 15k short. More credible is to get a place at 220k meaning a 70% mortgage of 154k and you need to find 66k plus costs of 16% 35200 aka 101200 Euros, so just out of reach but doable for most people. Remember though this is without decoration, modernisation etc so you need to buy it ready to go and furnished. More logical is a place at 200k meaning a mortgage of 140k, 60k down and costs of 32k leaving you with 8k to play with.

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"I Have 200k Saved"

Let's assume you sold a house back in your home country and you had a bit of a mortgage on it but came out with a nice chunk of change. You can put down 200k but you still want to maximise the cost of the property and pay more. The maximum you can buy for comfortably is 400k as a 70% mortgage will get you 280k meaning you are putting down 120k to buy and your costs are around 64k at 16% meaning you have 16K of your money left for moving costs.

If you really wanted to leave yourself with nothing in the bank then you could pay a bit more but it might shock your bank manager to go down from 200k to nothing in the account overnight especially when you have to start paying a mortgage next month. And a 200k mortgage over 20 years at 3.5% fixed interest will cost you 1165 Euros per month.

At this point I should also make sure to remind you that if you are looking for a Non-Lucrative visa then you would need to have money in the bank. You can read more about visa options here.

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"I Sold Up and Came Out With 500k But I Still Want a Mortgage and a Mansion"

Let's assume you sold your house back in your home country and you got lucky and your property sold for a pretty penny two weeks before a hurricane came along and spread it to the four corners of Florida. You can put down 500k but you still think that you want to keep up with the non-existent Jones's and want to pay more.

The maximum you can buy for comfortably is 1m as a 70% mortgage will get you 700k meaning you are putting down 300k to buy and your costs are around 160k at 16% meaning you have 40K of your money left for moving costs, buying scented candles and loads of cushions recommended by the interior design team you have been talking to. Again if you wanted to leave yourself with nothing in the bank then you could pay a bit more but it might shock your bank manager even more to go down from 500k to nothing in the account overnight when you have to start paying that pesky 700k mortgage next month.

And a 700k mortgage over 20 years at 3.5% fixed interest will cost you around 4100 Euros per month. Of course this is not going to happen as nobody would leave themselves so exposed to have nothing in the bank when they are going to be paying such a large mortgage so your two options are a lower priced property and a smaller mortgage or just buy outright at 400-450k and don't have a mortgage. For lots of people living mortgage free is a life goal and you can get a lot for your money at 450k in Valencia and around.

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What You Also Need to Know - The Basics

• The maximum age for the end of the mortgage period is 75 so yes, we know you can get a mortgage in the States when you are 82 for 20 years but you can't here.
• The maximum debt to ratio is around 35% so for every 1000 you earn you can pay 350 euros. Also banks will take into account all current loans so clean up that credit history and outstanding debts before applying.
• Some income is not taken into account when applying. Often banks will not accept income from short term rentals as it is not guaranteed into the future.
• You will get a better deal in general by using a broker rather than going directly to the bank. Yes, you'll have to pay the broker a fee but your ongoing mortgage repayment is likely to be considerably lower through getting a better deal.
• Don't take a sabbatical then apply as you have no income to show the bank and will not be able to get a mortgage here.
• Banks will give mortgages to both residents and non-residents and your income can be within Spain or outside.
• There are certain countries and currencies that if you earn your money in they will not take that into consideration when considering your application, eg South African Rand, Argentinian Peso etc... Any currency with huge devaluation will not be considered.

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Buying Without a Mortgage

When you buy without a mortgage then your costs are 15% on top of the purchase in Valencia so 100k becomes 115k total price, 200k becomes 230k, 300k becomes 345k etc... That's all you need to know isn't it?

Oh no! How is that 15% divided up? 10% purchase tax, 3% agency fee, 1% notary and registry and 1% lawyer, optional but not really because you'd be silly to not use a lawyer when splashing out 300k even if your agent tells you "There's no point, it's just wasted cash". It isn't.

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Cost Of Living in Spain

We have talked on these pages before about the cost of living in Spain and it's still relatively cheap although prices have gone up in the last few years post-pandemic. Nevertheless this is true everywhere so comparatively Spain remains cheap. If you want to know more about the cost of living here then just click on the image below to compare the big ticket items and the day to day. (It's not just for Americans but compares with their Home Owners Association costs, property taxes, healthcare costs etc)

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Work With Us At Valencia Property

If you are looking to buy your own place in Valencia then you might decide that you want to work with us at Valencia Property, the number one buyers' agent both in the city and Spain. Just fill in the form below with what you are looking for and we can start the process of finding you your perfect place in Spain. The more information you can provide and the further out from your visit the better we can help you.