Euro zone changes for foreign mortgages will be increasing, both now and in the coming months, due to the lessening liquidity of banks in the zone.
Tightening lending criteria across the Euro zone mean that banks are seeking excuses to not allow mortgages.
In France, for example, BNP Paribas reduced it’s interest only mortgage term for non-residents to seven years from 20. Borrowers will also need to prove assets outside the Eurozone of 150 per cent of the loan value.
Worse still, many of the new rules across the EU are being introduced without warning. New-builds, investment properties and interest-only mortgages are top of hit list for removal of foreign finance options. Loan to value ratios for foreign mortgages are also descending to around 75%, as they have in the UK.
Other Euro Zone Changes For Foreign Mortgages
Rental income is another area where banks in the Euro zone are making changes. New rules which will be introduced over the next two years mean that rental income from other properties could be discounted. Banks are requiring the amount borrowed to be based purely on the salary of the individual. A maximum six times their overall income will be allowed.
Over in Ireland in the early months of 2012, Irish credit standards tightened on loans to enterprises and loan demand from enterprises decreased further.
Some banks within the Euro zone are forcing every mortgage application to be double checked by a second underwriting team who have the power to deny the mortgage if they see fit.
Greece has had it’s fair share of issues, as has been well documented. Brokers are commenting that, Portugal, Ireland, Greece, Italy and Spain are the most difficult to deal with for finance if you are a foreign national trying to buy in the country you are not resident in. Buyers are increasingly having to buy through specialist brokers to increase the probability of a purchase actually occurring.
Spanish banks are more desperate than ever to rid their loan books of excess property so this is where the best rates can be found within the Euro zone. However, it should be noted that foreign buyers will not necessarily be welcomed with open arms. Banks within France and in Italy are generally more conservative on lending and will always be the first to implement changes.
One solution in Spain is to apply for a long term rent of a furnished 1 or 2 bed apartment, which would cost in the region of €400 to 600 per month, including property taxes. Sometimes you can get deals which allow the money paid as rent to be taken off the purchase price in a ‘rent to buy’ type arrangement.