Real Estate Reasons for a mortgage in Spain

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Reasons for a mortgage in Spain
Reasons why you should get a mortgage For many young first time buyers, often lacking enough savings to make a cash purchase, the benefits of getting a mortgage are obvious. However, there are

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Reasons why you should get a mortgage

For many young first time buyers, often lacking enough savings to make a cash purchase, the benefits of getting a mortgage are obvious. However, there are also reasons to get a mortgage even though you have the option to make a cash purchase using your hard earned savings.

1. Earn profits by making alternative use of your money.

The interest rates in Spainare among the lowest in Europe . If you chose to save your money and take out a mortgage you would have the alternative to invest the money in off shore low risk investment funds. These alternatives may include treasury bills, corporate bonds etc. These can provide returns much higher than the mortgage interest. After covering the cost of the mortgage, the excess returns will be profit.

2. Increased leverage.

Do you believe that Spanish property is a good investment? Many investors do, and they have enjoyed average annual price increases of 20% during the last ten years. Why not consider using your capital to increase your property portfolio by buying several properties instead of one? The profitability on a short term investment is currently very uncertain, there is a widespread belief in the market that that property prices have reached their peak and are expected to stabilize in the near future. Nevertheless it is anticipated that property prices will rise again in the next 10 years. Many believe that the average price increase will be 5-10% anually. As an investor you should also consider that you’ll gain money on the investment not only by price increases but also by renting out the property. The demand for rental properties is very high and therefore there is good income earning potential. The capital gains and rental incomes will most likely exceed the cost of the money used to finance your investment properties.

4. Reduced taxes.

When you pass away your children will pay less inheritance tax on mortgaged properties. If you become a tax resident in Spain you’ll benefit from tax reductions in your annual income tax return by having a mortgage.

5. Increase attractiveness when selling the property.

If you chose to sell your property you may offer the buyer the opportunity to take over your mortgage, thus saving important costs, such as the stamp duty of 0,50% and the set up costs which are 1-2% of the mortgage amount.