# Cash Purchase or mortgage



## Jims321 (Jun 1, 2015)

Hi

We're two British pensioners toying with the idea of buying a small flat in Spain.
I'd very much appreciate any general advice on this but especially guidance on buying new as opposed to previously lived in and also any advantages / disadvantages associated with a cash purchase. Many thanks in advance.


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## emlyn (Oct 26, 2012)

Where in Spain are you toying with the idea of buying?


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## Jims321 (Jun 1, 2015)

We haven't got a firm fix as yet. Looking generally around Costa blanca, Alicante and north.


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## snikpoh (Nov 19, 2007)

Jims321 said:


> Hi
> 
> We're two British pensioners toying with the idea of buying a small flat in Spain.
> I'd very much appreciate any general advice on this but especially guidance on buying new as opposed to previously lived in and also any advantages / disadvantages associated with a cash purchase. Many thanks in advance.


New versus old - this is really a personal choice but (in theory) any problems are known with an older property (would be my choice).

Mortgage versus cash - you can offset mortgage interest payments against tax, rates are low at the moment (we pay 1.1% above monthly eurobor). With cash, there are no debts to worry about but is your money working for you?


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## alborino (Dec 13, 2014)

Jims321 said:


> We haven't got a firm fix as yet. Looking generally around Costa blanca, Alicante and north.


If you have cash why would you even consider a mortgage? I cannot imagine no matter how good a return you get on invested money how that could add up.

On new property ensure you understand any VAT (IVA) considerations.

But there are bargains to be had. If you are going to do it there hasn't been a better time in quite a while. But do remember have an additional 15% in hand for tax/costs and you will most likely not get any surprises. 

But what a great adventure you have to come Jim. Good luck and enjoy


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## emlyn (Oct 26, 2012)

Jims321 said:


> We haven't got a firm fix as yet. Looking generally around Costa blanca, Alicante and north.


Some things I took into consideration as a pensioner were,
Distance from regional airport 
Availability of public transport 
Distance from local shopping centre
Would properly still suit in 10 to 15 years time
Location 
Cost of long term rental as opposed to buying 
Hope this helps


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## snikpoh (Nov 19, 2007)

alborino said:


> If you have cash why would you even consider a mortgage? I cannot imagine no matter how good a return you get on invested money how that could add up.



It's really very simple -

mortgage at 1.1%, investment at 5% = profit of 3.9% per annum

If the mortgage ever started to rise and/or the investment rates dropped, then one still has the capital to pay off the mortgage.

This is exactly what I've done and have had it confirmed by very competent (independent) wealth advisors.

Obviously one has to take into account such factors as being able to pay off the mortgage without fees, factor in selling costs from the portfolio etc. but it's certainly worth thinking about.


The bottom line is that you should make your money work for you and not just stagnate.


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## ccm47 (Oct 15, 2013)

Jims321,
As with anywhere if you buy a previously occupied property the snaggings should have been sorted, and you will be able to see what the finished products around you really look like. 
In Spain we bought off plan, 12 years ago now. The flats were built as described, as was the pool. We hadn't reckoned on the garden being one floor down at a much lower level. Not too upset about that as we now have an additional dining and bbq area down there in almost total privacy.
The landscaping to the development was supposed to include a 9 hole golf course: that never came to fruition, and the water features in the communal gardens were so full of croaking toads and frogs they soon got filled in. Behind our flat we were supposed to have a single story supermarket and restaurant. Instead we have a stagnated 3 story potential bowling alley which, whilst painted, resembles a 3 story car park awaiting vehicles. We still miss the birds that sang in the olive trees that stood there previously and no local shopping.


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## Jims321 (Jun 1, 2015)

Thanks to all for advice. I'm inclined to go for a straight cash purchase and have it done with. Too many imponderables down the line to worry overmuch about future disposal and all the rest of it. Thanks again to all!


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## alborino (Dec 13, 2014)

snikpoh said:


> It's really very simple -
> 
> mortgage at 1.1%, investment at 5% = profit of 3.9% per annum
> 
> ...


Now use real numbers for a retired couple and don't forget to add in the cost of very competent (independent) wealth advisors


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## snikpoh (Nov 19, 2007)

alborino said:


> Now use real numbers for a retired couple and don't forget to add in the cost of very competent (independent) wealth advisors


Those are REAL numbers as I took them from my situation!


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## alborino (Dec 13, 2014)

snikpoh said:


> Those are REAL numbers as I took them from my situation!


Snikpoh sorry I hadn't realised. Can you give me details of in particular the guaranteed 5% return as I'm buying in Cadiz in the next few months and if I can make money by simply taking out a mortgage that would be great. I've used ISAs but haven't been able to get near 5%. 

And the 1.1% supplier of mortgages as I haven't been able to find that without hidden extra costs. I assume it is from Spanish banks?

Maybe I'm out of touch as I had always been informed that because of short-term changes you were likely to get bitten. But I'm now spending 250,000 Euros so maybe being a larger amount makes it easier to get a worthwhile return.

Seriously cheers for getting me thinking on this and apologies from being wrong earlier.

ps And apologies Jim I thought this was not a good way to go but that gap looks worth chasing


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## snikpoh (Nov 19, 2007)

alborino said:


> Snikpoh sorry I hadn't realised. Can you give me details of in particular the guaranteed 5% return as I'm buying in Cadiz in the next few months and if I can make money by simply taking out a mortgage that would be great. I've used ISAs but haven't been able to get near 5%.
> 
> And the 1.1% supplier of mortgages as I haven't been able to find that without hidden extra costs. I assume it is from Spanish banks?
> 
> ...



I've had my mortgage for 9 years now so things may have altered. It was with Halifax which then became something else then was taken over by Sabadell. I have a mortgage which is tied to the MONTHLY eurobor and not the annual one - might make a difference.

My investments are in a Spanish portfolio (Spanish wrapper so are very tax efficient for Spanish residents) - obviously, the 5% is not guaranteed but it's about what I'm currently getting (after charges etc.).


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## Isobella (Oct 16, 2014)

Aren't set up costs for a Spanish mortgage high? Would a retired person be able to get a mortgage?


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## Roy C (Sep 29, 2012)

I was debating what to do, which would be the best way , as money is cheap to borrow, it might be nice to be able to have a bigger sum in the bank and borrow a small amount with low repayments or instead of paying off all the mortgage here leave about 30k on it, with very low repayments, tax relief etc.


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