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Is it better to pay off your mortgage early or save for retirement?

By Chris Burke
This article is published on: 10th August 2022


One of the more common and difficult questions to answer for clients, more because emotionally people like to pay off their debts and specifically their mortgage (its most likely the biggest debt you will have in your lifetime, if you exclude children!) is ‘Is it better to pay off my mortgage early or save for retirement?’ Well, I am very analytical, which is great being a financial adviser, so I need facts to make decisions and to look forward for clients planning.

Whether you’ve received a pay rise or you’re just planning for the future in general, it can be a challenge deciding how to employ use your hard-earned cash. From a psychological perspective, in a way it makes sense making clearing your debts a priority. However, will you be better off this way or by doing something else with that money/investing those funds? Which option will provide the better return on investment and generate long term wealth for you?

The first step is to evaluate your personal financial situation with a professional financial adviser if possible. There are many variables to take into consideration here such as:

  • What are your objectives/goals?
  • Do you have surplus cash each month?
  • Do you have an emergency fund in place?
  • What exactly are you looking to achieve?

Choosing to pay off your mortgage early
It can be very enticing to pay off your mortgage early and being debt free whilst owning your home outright. This may be able to save you thousands in the long-run and reduce your monthly outgoings, which could be a solid financial decision. Certainly, in the early years of your mortgage, if you are paying mainly interest on your monthly mortgage payments, then this may be the best option for you. However, have you considered the interest rate you have on your mortgage? Is this favourable when compared to other options? And furthermore, have you looked in to the potential early redemption penalties?

Pros of paying off your mortgage early Cons of paying off your mortgage early
Save on paying off the interest borrowed You may cut into your savings (and emergency fund)
Debt free earlier (psychological) Have you diversified? Is your mortgage your only investment?
More money available to you after Early redemption penalties
  Are you losing an opportunity to increase your wealth, by missing out on doing something more effective with the money?
  Money is historically cheap to borrow

Choosing to invest your money
Even though paying off a mortgage early can have many benefits and lifts the burden of repaying a large debt, in many cases it may be wiser to invest extra cash instead in the form of investments or retirement funds. With regards to investing for the future, the earlier that you do this the better. Interest builds up over time (the power of compound interest!) so the longer you have your funds invested ‘working for you’ the more they will be worth when it’s eventually the time to use them.

Pros of investing (vs paying off your mortgage early) Cons of investing (vs paying off your mortgage early)
Potential to see a higher rate of return and increase your wealth Riskier – returns are not guaranteed
The assets are more liquid – easier to sell if you are in need of cash Still requires that you make payments
Depending on the type of investment, there may be opportunity for tax savings or for your employer to match the amount Doesn’t make your debt ‘go away’

So, as I said earlier, I am analytical and its not for me to decide whether anyone should pay off their mortgage early or not, that’s their decision. However, mathematics doesn’t lie so let’s look at a real-life example. The Mortgage payments, rates of return and end results are real figures obtained from our mortgage department and professional investment calculator:

In the below examples I have used €1,930 as the monthly amount in total as this is what came back as the monthly payment for borrowing €300,000 over 15 years:

Case Study 1

Paying your mortgage off over 25 years and also saving for retirement along the way:

Property Value €600 000
Mortgage of €300 000 EUR (50% Mortgage)
25-year term fixed rate at 2%
€1,271 EUR monthly payment
Mortgage paid in full after 25 years

Meanwhile whilst also saving for retirement:

Investing €659 a month for 25 years (€659 + €1,271 adds up to €1,930, the 15-year monthly payment amount below)
5% compound interest
Value of investment/retirement plan after 25 years: €377,425

Case Study 2

Property Value €600 000
Mortgage of €300 000 EUR (50% Mortgage)
15-year term at 2% fixed rate
€1,930 EUR monthly payment

Mortgage paid off in 15 years

Then (after the 15-year period and mortgage fully paid off)

Investing €1,930 a month for 10 years
5% compound interest
Value after 10 years: €291,000

Comparison Results
After 25 years in case study 1, you will have the value of the property you are living in plus €377,425 towards a retirement fund. After 25 years in case study 2, you will have the value of the property plus a retirement fund of €291,000.

The difference is nearly €86,000, which I think most people would consider a decent amount of money. The main reason for this is that investing over a greater period of time will statistically bring you a greater return in your investments than shorter. Emotionally, people may like to pay their mortgage off first and then save for retirement, this will either mean you will have less for retirement in the above example or it will cost you a lot more. You would actually need to save €2,500 per month for the 10 years in case study 2 to achieve the same retirement pot, a whopping €68,400 more for the same outcome.

Should I pay off my mortgage or invest?
Before making a decision, it’s important to do a full-scale financial review (ideally with a financial adviser). For example, do you have an emergency fund in place to cover you in case of any unexpected surprises? Furthermore, take your life situation and goals into account. Do you have any plans to travel which you will need the money for? Or a wedding? Furthermore, how long do you think you will be in your home for? If you are considering moving to another place in the near future, it does not make sense to pay off your mortgage (and potentially paying a penalty).

Both options can be seen as very smart financial decisions, depending on your personal circumstances. But everyone’s financial situation is different. It’s important to take everything into consideration and consult a professional.

If you would like to speak with a Financial Adviser in Spain, I am experienced, qualified and legally able to discuss your financial matters. I am also able to review your current pensions, investments and other assets, with the potential to make them more effective and tax efficient moving forward. If necessary, we can perform in depth financial planning to get you set up/back on the right path/or ready for retirement once I fully understand what you are looking to achieve and your situation.

You can get in touch via the form below – or click the button below to make a direct virtual appointment here.

Est-il préférable de rembourser votre prêt ou d’investir?

By Cedric Privat
This article is published on: 13th November 2020


Vous avez reçu un don, un héritage, un bonus ou avez accumulé de l’épargne sur vos comptes et vous vous demandez comment utiliser cette somme au mieux.Nous allons analyser ensemble les différents points à prendre en compte dans cette prise de décision.

Épargne de précaution :
La première règle sera de ne pas mobiliser toutes vos liquidités et de garder un capital libre.L’immobilier n’est pas un capital disponible rapidement; un bien peut prendre du temps à se vendre et le transfert de placements prendra plusieurs semaines avant d’être transféré sur votre compte bancaire.

Cette somme de précaution devra plutôt être disponible sur un compte courant pour vous permettre de couvrir vos frais réguliers (fond de roulement) et de faire face à un possible imprévu. Pour plus de sécurité, elle devra être équivalente de trois à six mois de salaire, surtout si vous avez des enfants.

Frais de remboursement anticipé :
Si vous choisissez de rembourser votre prêt, la première démarche sera de vérifier votre contrat (ou de contacter votre agence bancaire). Si le montant des frais du remboursement anticipé (ou pénalités de remboursement anticipé) est trop élevé, s’acquitter de cette dette pourrait s’avérer trop onéreux (en moyenne , les frais s’élèvent à 3 % du capital restant dû).

En revanche si vous aviez négocié des frais 0 à la signature du prêt, vous devrez alors confronter le taux de votre prêt et celui de vos placements.

Comparer les taux :
Si le taux de votre crédit est bas, il est surement intéressant de ne pas toucher à cet emprunt ; on peut alors le qualifier comme une bonne dette.

Néanmoins, le taux de rémunération de vos produits d’épargne se devra d’être supérieur à ce taux de crédit. Mais avec un Livret A ayant un taux de 0.75 % depuis 2015 et le rendement du fonds en euros de l’assurance-vie qui ne cesse de baisser depuis les années 2000 (placement 100 % fixe garanti), même surpasser l’inflation (évolution des prix à la consommation) peut s’avérer difficile.

Même les investisseurs les plus prudents se doivent désormais de choisir des placements avec (au moins) une partie variable, tout en s’adaptant à leur profil de risque, afin d’obtenir des rendements supérieurs qui couvriront les taux d’intérêts de l’emprunt et permettront de gagner de l’argent. (assurance-vie en unités de compte/SCPI/obligations/actions/fonds d’investissement, etc.)

Property in Spain

Les avantages du crédit immobilier :
Un crédit immobilier peut vous permettre de développer votre patrimoine via un effet de levier.

Continuer de payer vos mensualités pourrait vous permettre de diversifier votre patrimoine vers des placements ou d’effectuer un nouveau prêt pour un nouvel achat immobilier (si possible locatif et avec des loyers égaux ou supérieurs à vos nouvelles mensualités).

Il est aussi possible de réduire son imposition grâce à la dette, notamment dans le cadre d’un investissement locatif ou dans le cas d’une succession.

Comme souvent on ne peut pas établir de règle générale pour répondre à ce type de question. Tout dépendra de votre situation, votre contrat bancaire, vos rendements de placement ou même de l’ancienneté de votre prêt (car vous remboursez beaucoup plus d’intérêt bancaire les premières années).

Se libérer de vos dettes peut psychologiquement être satisfaisant, mais dans de nombreux cas de figure, ce remboursement anticipé ne s’avèrera pas financièrement intéressant. Il sera important de ne pas prendre de décision rapide et émotionnelle mais de planifier et calculer ces décisions.

Le groupe Spectrum à Barcelone se propose d’étudier gratuitement votre situation afin de vous aider, de vous conseiller, de vous orienter ou de vous guider dans vos démarches patrimoniales.
De plus, en Espagne comme en France, Spectrum possède une section “courtier en prêt immobilier” pour vous aider à bénéficier des taux les plus avantageux.
N’hésitez pas à nous contacter afin d’obtenir les réponses d’un professionnel aux questions que vous vous posez.

Mortgage Rates in Spain

By Spectrum IFA
This article is published on: 31st January 2020


At Spectrum International Mortgages we do an annual update on the rate development in Spain. We do this every year in February and this year will be no different.

As ever, the rates we mention are based on the market at the moment of publishing and we cannot guarantee that these rates will be available in the future, nor that they will be applicable to every individual case. Additionally, it is worth noticing that the banks in Spain still do not offer interest only mortgages, which means that both the fixed rate mortgages and variable rate mortgages are capital repayment loans.

Duration in years rate in % (with correct client profile)
10 2.00
15 2.10
20 2.25
25 2.35
30 2.50

Looking at variable rates, we observe around 1.2-1.5%+EURIBOR

Get a Spanish Mortgage Quote

As opposed to last year, we are now seeing that the Spanish banks have a bigger focus on financial profile rather than residential status. This means that although non-residents are still offered a lower LTV than residents, the fact that they are non-residents no longer has the same impact on rates, terms and conditions as it did last year around the same time.

The rates above are still so called “clean” rates, meaning that except for the first year, there are no other products from the bank attached. It is still normal practise for the banks to have clients set up e.g. different insurances, credit cards, investment funds or pension plans to decrease the rate. Arranging a mortgage through us, you will be able to avoid this in the vast majority of cases. Every case is handled individually and rates will vary depending on individual circumstances, but as a guideline, this is a realistic scenario for the moment.

How will that unfold for a mortgage of 280,000€?

To apply this in reality, let me provide you with an example of how a mortgage of 280,000€ could look when going through Spectrum International Mortgages:

Property price 400,00€
Mortgage amount 280?000€ (70%)
Duration in years 20
Fixed rate 2.25%
Monthly instalments 1,449.86€

Cash needed to complete the operation 168,000€ (30% down payment ->120,000€ plus approximately 12% taxes and costs -> 48,000€ = TOTAL of 168,000€

Products contracted for the first year: life and house insurance. After the first year both insurances can be cancelled with the bank and set up externally, which is normally advisable.

For more information, please contact our specialists in the mortgage team

Acheter un appartement à Barcelone : bonne ou mauvaise idée ?

By Cedric Privat
This article is published on: 15th October 2019


Vous êtes nombreux à vous poser la question du choix entre l’investissement immobilier et le placement financier, dans l’objectif de faire croître votre patrimoine.

  • Investir dans la pierre est souvent considéré comme une valeur sure, mais est-ce toujours le cas malgré la flambée des prix des dernières années?
  • Faire un placement financier permet de conserver une liquidité et bénéficier d’une imposition avantageuse, mais avec les taux fixes au plus bas et l’inflation actuelle il est désormais impératif de prendre un certain risque

Avant toute décision, il sera important de comprendre les avantages et inconvénients de ces deux options. Nous étudierons dans un premier temps via cet article l’achat immobilier à Barcelone.

Depuis les jeux olympiques de 1992, Barcelone est devenue une des villes les plus attractives d’Europe: à visiter, y vivre, y travailler et pourquoi pas investir?
La ville plaît beaucoup aux français, plus de 20 000 d’entre eux y vivent toute l’année et on ne compte plus les milliers de touristes quotidiens qui affluent de toutes parts.

À seulement 150 km de la frontière, la ville attire par son soleil, ses plages, ses montagnes proches, sa qualité de vie, sa culture, sa population cosmopolite, sa bonne connexion TGV/avion, etc.
Cet engouement comporte néanmoins certains revers dont tout futur investisseur doit tenir compte; notamment une insécurité croissante ces dernières années, une situation politique instable et des lois souvent en faveur du locataire (voir même okupas/squatteurs) en cas de conflit avec le propriétaire. La crise du marché immobilier de 2008 a également inquiété de nombreux particuliers projetant un achat à Barcelone.

Première question: achat perso (pour y vivre) ou achat locatif ?

  • Si vous comptez rester à Barcelone pour le long terme, un achat personnel s’avère souvent être la meilleure solution. Finis les loyers, vous serez enfin chez vous et pourrez potentiellement faire une plus-value si vous gardez ce bien assez longtemps. Mais attention au marché en haut de cycle; des études démontrent qu’actuellement une acquisition ne sera financièrement avantageuse par rapport à une location que si on garde le bien au moins 10 ans. Une revente rapide sera synonyme de moins-value; une stabilité professionnelle et familiale est donc indispensable
  • Pour un achat locatif vous devrez dans un premier temps évaluer le taux de rentabilité brut (diviser le revenu locatif annuel par le prix total du bien), si le résultat est inférieur à 6 % brut alors le rendement n’est pas suffisant (voir le paragraphe “Les coûts” ci-dessous pour avoir une estimation du résultat net). Aucun achat ne doit être fait sans une étude et un calcul précis

Il sera important de ne pas diaboliser le fait de rester en location. L’expression “jeter ses loyers par la fenêtre” est dépassée car nombreuses villes se sont avérées à une certaine période être plus rentables en location qu’à l’achat. Vous gardez ainsi votre liberté, vivez dans une superficie plus grande et n’avez pas à supporter les coûts et impôts d’un propriétaire. Nous aspirons pour la plupart à être propriétaire un jour, attention néanmoins à ne pas se précipiter.

La situation du marché ?
Le prix du marché doit ensuite être étudié, il vaut bien entendu toujours mieux acheter quand les prix sont bas.

Le marché à Barcelone est haut même s’il n’a pas encore atteint les chiffres de 2007, les prévisions annoncent une stabilité pour 2019/2020.

Crédit bancaire en Espagne: comment ça marche ?
Si vous êtes résident fiscal en Espagne vous devrez certainement passer par une banque locale pour votre prêt (peu de banques françaises vous accompagneront, à moins d’avoir un bien en France).

Un maximum de 80 % du prix du bien peut vous être prêté (70 % si non-résident), pour une durée maximum de 30 ans (jusqu’à l’âge limite de 70 ans). Il vous faudra donc un apport de 20 %.

Les espagnols sont habitués aux taux variables (très faibles ces dernières années), ce qui signifie que vous êtes dépendants de l’Euribor (taux de référence du marché monétaire de la zone euro), mais en cas de hausse de celui-ci vous risqueriez de voir vos mensualités fortement augmenter. Nombreux sont ceux qui ont perdu leur bien pour cette raison il y a 10 ans.

Depuis quelques années les banques espagnoles proposent de plus en plus un taux fixe comme le font le plus souvent les banques françaises. Vos mensualités resteront donc inchangées sur l’ensemble de votre prêt bancaire. Les taux sont plus élevés qu’en France, actuellement comptez entre 2.2 et 2.7 % pour un prêt sur 30 ans en Espagne

Quels sont les coûts ?
L’imposition sur un achat immobilier en Catalogne s’élève à 10 % du prix d’achat (11 % à partir de € 1 million). À cela s’ajoute les frais de notaire et frais divers liés à l’achat: comptez entre 3 et 4 %.

Comme évoqué précédemment, un apport de 20 % étant demandé par les banques en Espagne, l’apport global nécessaire est donc de 34 %.

Cas pratique: pour un appartement vendu € 300 000: le nouveau propriétaire doit donc s’assurer de posséder une liquidité de € 102 000 (impôt € 42 000 et apport € 60 000).

Être propriétaire vous impose également des coûts annuels qui viennent s’ajouter à vos mensualités bancaires:

  • IBI (Impuesto sobre Bienes Inmuebles), équivalent de la taxe foncière française
  • Assurances et impôts divers (tels ordures ménagères)
  • Charges de copropriété
  • Travaux d’entretien, maintenance, remplacement des gros équipements, rénovation (votés lors des réunions de copropriété ou obligatoire telle la rénovation énergétique)
  • Si vous louez ce bien, vous devrez éventuellement ajouter les frais d’agence (surtout si vous n’habitez pas à Barcelone) et le coût lorsque l’appartement n’est pas loué. Sans vouloir être négatif; il ne faut pas occulter les éventuels frais de justice ou d’expulsion si vos locataires s’avèrent être mauvais payeurs ou insolvables.
  • Et bien entendu le coût d’un prêt bancaire qui varie selon le coût d’achat, les années et le taux négocié
  • Concrètement, en s’appuyant sur l’exemple ci-dessus, l’achat d’un bien de € 300 000, le prêt sollicité sera de € 240 000 (maximum 80 %)
    Supposons que la banque vous accorde un taux fixe sur 30 ans à 2.5 %, vos mensualités s’élèveront alors à € 948.29 soit un remboursement total de € 341 384.
    La banque vous facturera donc € 101 384 pour un prêt de € 240 000

En conclusion, il n’y a pas de réponse évidente à la question: “Acheter un appartement à Barcelone : bonne ou mauvaise idée?” car l’équation a souvent plusieurs inconnues et de nombreux paramètres sont à prendre en compte. Acquérir un bien immobilier est une décision importante, un engagement, qui peut correspondre parfaitement à certains particuliers, mais peut vite devenir un gouffre économique pour d’autres.

Comme toute décision importante il est indispensable de planifier, calculer et comparer les options disponibles. L’immobilier a constitué un excellent investissement pour la génération des baby boomers, mais il ne doit pas être une obligation ni une logique. Obtenir une plus-value n’est plus systématique et comme tout investissement un achat immobilier implique un risque: rien n’est garanti (“sauf la mort et les impôts” disait Benjamin Franklin).

Spectrum conseille à ses clients de toujours diversifier leurs investissements et garder un équilibre dans son patrimoine entre l’achat immobilier et le placement financier. Des alternatives d’investissement existent en France et en Espagne telles l’assurance-vie (2ème placement préféré des Français après l’immobilier) ou les SCPI (Société Civile en Placement Immobilier).

Nous nous proposons de vous guider en nous adaptant à votre situation, chiffrer les différentes alternatives et vous présenter l’ensemble des options disponibles sur le marché.

En Espagne comme en France, Spectrum possède également une section “courtier en prêt immobilier”. A votre demande, nos conseillers sont à votre disposition pour effectuer les recherches nécessaires auprès des banques. Ils sauront vous guider, négocier en votre nom et vous permettre d’obtenir un meilleur taux à moindre coût sans frais de remboursement anticipé.

N’hésitez pas à me contacter. En tant que consultant chez Spectrum, je me tiens à votre entière disposition pour étudier toutes demandes ou répondre à vos questions.

The French Property Exhibition

By Tony Delvalle
This article is published on: 29th August 2018


The Spectrum IFA Group at
The French Property Exhibition,
Olympia London, 15th – 16th September 2018

The Spectrum IFA Group is pleased to be exhibiting at The French Property Exhibition on the 15th and 16th September. Established over 25 years ago, this event is a ‘must attend’ for anyone who is serious about buying a property in France and is one of the UK’s most popular and long-running overseas property shows.

The show is the perfect opportunity to find out more about buying your dream home, with experts on hand to offer practical advice on a range of issues, from mortgage, tax, legal and investment matters, to guidance on wills, estate planning, pensions, currency transfers and more.

We are located at Stand 30, where our independent advisers and specialist mortgage representatives, all of whom live and work in France, will be available to answer questions and outline how we can help.
Event details are published on-line in advance of the show, giving you time to plan your day and ensure you get the most out of your visit. All sessions are free to attend, with tickets available on a first come, first served basis.
All visitors receive a complimentary copy of French Property News on arrival and a free show guide. Register for free fast-track entry now!

To book FREE tickets to the 2018 Olympia London event on the 15th & 16th September 2018, please click here.

We look forward to meeting you at stand 30.

Is buying Property in Barcelona a good investment?

By Chris Burke
This article is published on: 29th June 2017


Over the years, we’ve heard the arguments as to which is the better investment: Property or investments. Both have their advantages and disadvantages, and there are several aspects of each that make them unique investments in their own way. To make money with either investment requires that you understand the positives and negatives of both.

Ever since the Olympic Games in 1992, Barcelona has become a very popular place to visit, live, work and invest.

Why is Barcelona such a great place to live?
From a logistical point of view, quality of life, the cost of living and the culture/the way people live here, it’s easy to see why Barcelona is such a popular place to live. It has a good International airport 15 minutes away by car that flies to most destinations, and the most popular several times a day (to London for example you have more than 30 flights a day in the summer). You can live as cheaply or as expensive as you wish and still enjoy the beautiful city (even the museums are free on at least one night of the year) as well as the surrounding countryside and beaches. With France only being just over an hour away, the Ski slopes two and a half, it’s easy to see why it’s such a popular place to live. The city has a very laid back feel and is easy to get around. I have never heard anyone say they have had enough in Barcelona, put it that way. Yes, it does have some problems like any city, notably organised theft but if you are aware of these then you can easily stay away from them.

Historically, mathematically, it is hard to beat Property as an investment if purely making an overall gain on the money you do invest is your end goal in Barcelona, just as in many other major cities. Property is something that you can physically touch and feel – it’s a tangible good and, therefore, for many investors, feels more real. For many decades this investment has generated consistent wealth and long term appreciation for millions of people. And therefore it should be part of anyone’s assets if they are able to afford one.

What you do have to consider though is why are you buying this property? Is it for a home i.e. an emotional purchase, or purely an investment? For what length of time? What is likely to happen in your life in the next 5-10 years? What currency do you have your money in now? These are some of the key questions to ask yourself.

If you are buying for a home, what you would call an emotional purchase, then in terms of evaluating as a good investment it’s almost irrelevant. This is going to be your home, so whether it goes up in value a great deal, a little or not at all (unlikely over a 15-20 year period) it’s about being happy living there, by yourself or with your family, is all that matters. It’s the memories that count perhaps more than anything else. As long as you don’t pay way over the market value for a property, in the long term you should be fine as an investment and as a home. If it’s purely for an investment, then you need to take into consideration a lot more factors.

If your money is in a different currency to Euros, is it a good time to change that?

Brexit (particularly if you are British)
Many would argue that keeping a ‘foot’ in the UK with assets or currency is a good thing to do. You never know what is going to happen, it gives you options in the future. You might not want all your assets in Euros, in case you decided to return to the UK as some people have. If there has been a big swing in currency against the pound, this could seriously limit where you do live/your options.

The Costs of Buying a Property in Barcelona
Buying a property in Catalonia is expensive. The costs of purchase are approximately 13% in total. Comparing that to the UK, which up to the value of £250,000 it would cost you approximately 3%, and over £250,000 it would be around 6%. Adding to that the cost of then selling your property at 5% in Barcelona as opposed to 2% in the UK, it is around 10% more expensive here than in the UK to buy and sell somewhere. So if you are looking for a short term investment and particularly if your money is in sterling, taking those factors into account it’s going to be more challenging to make it work for you.

If you are solely interested in investment return, then you have to look at the ‘Yield’ of a property and be unemotional regarding it. This tells you how much of an annual return you are likely to get on your investment. It is calculated by expressing a year’s rental income as a percentage of how much the property cost.

In other words, if the estimated monthly rental on a flat is €1,000, the annual rental would be 12 times that, or €12,000. And if the flat cost €200,000 to buy, then the “yield” would be described as 6% (annual rent, divided by the cost of the property, multiplied by 100). This is known as the ‘gross yield’ which is before all other expenses on running the apartment; the ‘Net Yield’ would be after all costs’.

Therefore, as an investment most professional property investors will not purchase anything less than 7% Yield (gross depending on the maintenance costs of the property annually) otherwise mathematically the property is not giving enough return, even though many will argue the price is increasing and therefore in real terms your investment is rising. But for most property investors, it’s ALL about the Yield.

It’s also all very well buying property in an upward market, as many investors will tell you. The secret to making a profit on property investing is very simple: buy at a good price and sell for much more. That all sounds very easy, but if the charges are excessive it could take quite a while for that to come to fruition.

However, Barcelona in general is on a good upward trend which helps, and also it’s clear to see that if you look hard enough, there are some bargains still to be found. And perhaps one of the biggest benefits of buying in Barcelona, is that you can fix your mortgage ‘for life’ at a very good rate at present, something which is unheard of in the UK. Currently you can get around 2.5% fixed for the life of your mortgage Let’s just think about that for a moment. So let’s say your mortgage is €1,000 a month now, in 25 years time it will STILL be €1,000 a month. Historically inflation goes up by 3% every year, meaning every 24 years inflation doubles. So, IF you could get a mortgage at the same rate in 24 years time it would be €2,000 a month, however it is more likely the rate will be higher then as we are at a time when the rates are incredibly low. So, to put it in real terms, in 24 years your salary, should you stay in the same job, should have gone up with inflation and therefore doubled, yet you will STILL be paying the same mortgage of €1,000. Therefore, every 8 years your mortgage outgoing will be decreasing by a third in real terms.

If you are going to own more than one investment property, it would probably be more tax efficient to put these into a Spanish company (S.L.) and have these managed for you. Arguably it would save you money in taxes and inheritances later (although these laws do change) by taking money out through dividends.

What other options do I have?
If you want to ‘flip’ your money, that means to invest in something short term, make a profit and take your money out then your options are limited. Stocks can be volatile over that period of time, back accounts offer tiny interest rates and in general you are looking at more high risk strategies. One of the reasons for this is, yes over a period of time property is a great performing asset, but property prices don’t just keep going up, or even stay the same. If you were to buy at the wrong moment, when the market freezes or crashes, you could find it very difficult to get out of that particular property without holding it for a long period of time or losing money. Cyclically they can crash, and when they do, this can cause major headaches/heartache for the owners. Not just from a loss in value either.

Potential Property investment issues
Imagine your 2 properties are rented out as investment. However, what if one of your tenants decides not to pay anymore, because they lost their job, or just because they decide they don’t want to (this happens more than you think). That income needs to be covered. In the UK you have procedures in place to remove these tenants fairly for both sides within 3 months. IN Barcelona, this is not the case. The laws are on the side of the tenant, and most lawyers will tell you the best way to get your non paying tenants out is to pay them off, unbelievably! And even then they could still refuse to leave and there is not much you can do until the end of their contract.

Let’s imagine that none of this happens, that you have a successful property investment over 15 years and you manage to double your investment of €200,000 into €400,000. Of course, you also have fees of 18% to consider (13% on buying, 5% on selling, although remember you are selling at €400,000, not €200,000 so its 5% of the higher figure. So actually you receive €400,000 minus approximately €46,000, that’s a gain of €154,000 over a 15 year period). Now you have to pay capital gains tax on that gain which starts at 19% up to 23%, which would be €34,300, so you would be left with €119,700. Which assuming the rent you received covered the mortgage and not much else is a decent sum.

However, let us imagine that instead of owning two properties, you only owned one. The other you invested in a portfolio that matched your risk/reward profile, that was liquid (you could have access to this after 5 years, with limited access before it) and very tax efficient.

Being cautious, let us say you achieved 4% gain per year on your investment which would value that at €360,018 (4% compounded interest over 15 years). There are no other charges or taxes to worry about except capital gains tax on that amount. If you have done this with a Spanish compliant product, you would qualify for ‘Spanish proportional Tax’ which means the gain would be offset by the original investment amount. Therefore, in the above scenario you would pay €35,584 capital gains tax on the property, leaving you a net profit of €124,434 . However, if you took this as an annual income of say €14,000, then just over half would be tax exempt, see below:

€14,000 drawdown per year from €360,018, tax payable of €1,187 per annum.

You can repeat this year after year, and on the basis that 4% interest is earned from the €360,018 at €14,000 annually, this effectively covers the €14,000 a year you take as income, meaning you could receive this every year paying the same tax, still keeping the same capital amount of €360,000.

So in real terms, over another 15 years you would pay little more than €17,805 in tax, from taking €210,000 income AND still have the capital of €360,000 which you can use/assign to someone else or pass on to heirs.

You would have liquidity (access to money if needed) and perhaps most important FLEXIBILITY. To help your children with university fee’s, provide yourself a tax efficient income or just take the money whenever you needed it (after 5 years).

Like property, investments are not guaranteed although over the last 30 years they have well outperformed property. In the UK for example, property has achieved around 402% return in that time, compared to UK equities (stocks) which have achieved 1433% (dividend shares re-invested).

To summarise, Barcelona Property can be a very good investment, but nothing is guaranteed in life except death and taxes (Benjamin Franklin). You should have a ‘basket of investments/assets including property/investments’ if possible, that are well thought out giving you the freedom, flexibility and liquidity to provide income for you.

Property Thursday on Riviera Radio

By Lorraine Chekir
This article is published on: 14th April 2017


This week on Riviera Radio’s Property Thursday, Lorraine was delighted to be asked to shine her light on the property market in the South of France. With BREXIT being such a hot topic, what does this mean for British residents or expats wishing to buy a property in France?

Whether people are looking to buy a home or an investment property, there are many aspects of a person’s financial situation that needs to be examined before deciding on the various funding options. Talking to an Independent Financial Adviser that is registered and also resident in France is certainly the best place to start.

You can listen to Lorraine’s interview below:

Buying Property in Spain

By Richard Rose
This article is published on: 6th August 2014

Investors are returning to the Spanish property market in increasing numbers following the bursting of the property bubble and financial crisis of 2008/2009. Property values have fallen by as much as 50 percent and beyond in some areas, creating pain for those who bought at the top of the market, but opportunity for new investors.

It’s not just individual investors who are returning to the market, but also large institutional property investment firms. They typically are purchasing tranches from the “bad bank,” set up by the Spanish government to relieve pressure from its banks, and also directly from banks and other institutions.

Like any investment, we would much rather purchase an asset at the bottom of its cycle than its peak. Easier said than done. I would challenge anyone who purports to be able to pick the top and bottom of any market; however, there are several pertinent points to consider when looking at the present value of the Spanish property market. The market has fallen considerably, Spain’s economic outlook appears to be slowly improving, tourism in many areas actually has picked up over recent years and demand from international individual and institutional investors is increasing.

Buying property in Spain, particularly around the yachting centers of Barcelona and Palma de Mallorca, has historically been popular and is becoming popular again, but the cost of purchasing property varies from region to region. In Catalonia, the transfer tax for the purchase of a secondhand dwelling has increased to 10 percent of the purchase price as regions look to increase their tax revenue. When you include notary fees, registration fees, property valuation costs, etc., the purchase costs can be estimated at 13 percent of the purchase price.

Borrowing in Spain, despite what you may hear, is still possible for yacht crew. Most banks will lend a maximum 60 percent of the property’s value to non residents, and a few will now lend up to 70 percent, dependent on the applicant’s financial circumstances.

Assuming the highest loan to value of 70 percent and purchase costs of approximately 13 percent, investors would need equity of at least 43 percent of the purchase price to complete the acquisition. For Spanish residents, the loan to value figure generally increases to 80 percent, again dependent on a person’s circumstances. If the property is subsequently rented, the income is taxed at marginal rates. Ongoing local taxes also apply, although they are relatively low in most municipalities; capital gains tax and inheritance tax may also be levied.

It’s recommended that professional advice be sought before making any property investment. A mortgage broker should be able to source the best terms and conditions for any financing that you may need.

Buying property in the UK

By Peter Brooke
This article is published on: 21st July 2014


Many crew like the idea of investing in UK residential real estate, not just Brits. The strong legal system, common language, lending availability (although this has changed somewhat) and large population, make property ownership in the UK an attractive option for growth and income investors alike.

The obvious risks are currency, liquidity and “arms-length management.” If you don’t earn in sterling, then owning a large sterling asset can mean large swings in value due to exchange rate changes. Annual liabilities can change dramatically too, so consider this.

Like property everywhere, it’s a highly illiquid investment. If you want to sell quickly, you may lose a lot of value, and it may still take months to get your money out. Although it’s an excellent part of a portfolio, property needs to be just that and not the entire dossier.

Managing a property (or portfolio of them) in the UK when you are based on a yacht in the Med or Caribbean can be very difficult unless you employ a good agent to manage any works or changes in tenants. This cost needs to be built into the figures as to whether or not to buy.

Having said that, if the rental yield is good (and therefore someone else is going to pay off your mortgage or give you a good income), then UK property can be an excellent choice, especially if you know the market. Big student towns still seem to offer excellent yield opportunities, but management costs tend to be high. The UK market is steady in terms of growth potential, but the Southeast and London are described as a “bubble” risk.

Buying property in the UK:
Be aware of the different types of ownership (freehold and leasehold) when researching property; they can have far-reaching consequences and costs. There will be Stamp Duty Land Tax (SDLT) to pay on the purchase, which is on a sliding scale from zero to seven percent for properties more than £2 million. Be aware of the brackets, as a  slightly lower offer could save you thousands in stamp duty. On top of this, you will pay some legal fees for conveyance advice and services.

Borrowing in the UK:
It’s still possible for yacht crew to borrow, but it’s getting a little harder as banks tighten their rules, and the UK government may further legislation to tighten this more. Banks prefer that the property be rented out, as the income can help secure the loan. Interest rates for non-residents, especially yacht crew, also tend to be higher than those for residents. Generally, crew can borrow around 75 percent of the purchase price, and will have to fund the SDLT and legal fees as well. Any rental profit is taxable in the UK, whether you are resident or not, as is capital gains tax and inheritance tax.

There are many considerations when buying property, so good, qualified advice should be sought, especially if it’s part of an overall plan; a mortgage broker should also be able to find the best terms for you.

Stick or Twist?

By Spectrum IFA
This article is published on: 6th June 2014

Stick or Twist? Or maybe both? Let me explain.

Thankfully, despite the ups and downs of the UK housing market and the £/€ exchange rate, there are still plenty of new expats arriving in France. It is noticeable though that quite a few of us are taking the decision to return to the UK. At first, this trend surprised me, but then I began to think about it in more detail.

I always have the same conversation with all my new clients. Where do you think you will be living in ten, twenty, or thirty years’ time? The most popular answer is here, in France. ‘Wild horses wouldn’t drag me back.’ ‘I’ve escaped from the concrete jungle, why would I want to go back?’ ‘ I only go back when I have to, to visit relatives. If they weren’t there, I’d never go back.’

That is of course the more entrenched end of the market. A lot of people will qualify their enthusiasm for being here by using the word ‘we’, and it is an important detail, conveying ‘I know where I want to be as long as my spouse/partner is with me, but I don’t know what will happen when that isn’t the case’. And just in the cause of balance, yes, I have met potential clients who said that they were here to try out the lifestyle, and if it didn’t suit, they would go straight back. That stance is however rare.

I then realised that time does, indeed, fly by. I’ve been talking to new expats for over eight years now, and we all get older. Some even wiser. Should I be surprised that some of my early clients have returned to the UK? Probably not. The reasons they give are interesting, and make a lot of sense. Illness and death are way up on the list of reasons to go ‘home’. Not your own death of course, but that of your partner. Widow(er)hood can be a lonely place. And we all know that the French health service is one of the best in the world, but it’s not English, is it? We might feel linguistically comfortable in a restaurant, a garage, or a supermarket, but when it comes to being interned in a foreign hospital with our internal organs at stake, it’s a different matter.

Divorce is another deal breaker, as is debt, but number three in my league table of reasons to be homesick is/are – grandchildren. A natural progression. We have children, they have children, and we feel a very strong emotional tie to those children. Being a thousand miles away doesn’t feel very good, and the pressure grows with them.

Where, you might ask, is this all leading? Am I reading a dissertation on the social demographics of Europe, or is this bloke supposed to be a financial adviser? Fair cop, let’s get back to finance. The reason I’ve been thinking about how and why some clients return to the UK is totally financial. I used to be a corporate foreign exchange dealer. An important part of that job was teaching clients how to avoid exchange rate risk, and how to eradicate it or at least manage it if they already had it. The problem with expats is what is avoiding risk and what is creating it?

If you relocate to France and it is your avowed intent never to leave these shores again, the only way to avoid F/X risk is to move all of your assets into Euro. At the other end of the scale, if you come to France for a three month holiday, you would be mad to change all your sterling into Euro, with the likelihood that you would change it all back again three months later. So where does this leave our undecided expat, who might live in Euroland for twenty years or more, but then return to the UK?

Stick or Twist?

Now my job starts to get a bit complicated. To give you the best advice on your investments and pension funds, I have to decide what your real expat profile is. Luckily for both me and my clients, the choice isn’t all black and white. There are shades of grey. You can indeed ‘stick and twist’ at the same time. I tend to take a different view of pension assets than I do to investment funds. One of the great selling points of transferring your pension fund outside of the UK is that you can invest it in Euros, but if there is even an outside chance that you will be spending your latter years in the UK, should you desert sterling? Don’t think I’m arguing against transferring your pension though. There are plenty of other benefits, and you can transfer and keep your fund in sterling.

Investment funds I see as being more flexible. I’ll take Assurance Vie as a given here. If you don’t know what it is, send me an email immediately. You don’t however have to make any full term commitment to either currency. You can in fact have both, and a number of clients are now taking that option. You can have as many assurance vie contracts as you like. This offers both flexibility of currency choice, and also of investment method.

To summarise then, my message is that it is important to get your investments into a tax efficient environment, but it is also important to decide what currency to be in at what time. I’d like to think that I’m in a good position to help you make those choices. If you have any questions on this, or any other subject, please don’t hesitate to contact me.