A dream turned nightmare
Recently, I met a UK couple who had found their dream family holiday home in Spain. During our first conversation, it was clear they were stressed. They had signed a contract requiring a 10% non-refundable deposit to secure the property. Confident in their ability to afford the mortgage, they approached a Spanish bank, only to be told that obtaining a mortgage was impossible. Their dream was on the brink of collapse.
Identifying the mortgage documentation problem
To get to the bottom of their issue, I thoroughly analyzed the couple’s income, financial obligations, and overall situation. Initially, everything seemed affordable, but further probing revealed an underlying problem.
The couple was self-employed, and although their current year’s income was healthy, their profits for the previous two years were significantly lower. Spanish banks typically require a two to three-year income history for self-employed applicants. Their recent transition from “sole traders” to a UK limited company meant they had no annual financial statements to demonstrate consistent business profits.
Overcoming self-employment challenges
Having worked as a mortgage adviser in both the UK and Spain, I understand the unique challenges self-employed clients face. Banks often ask such clients to reapply after a year, which can be discouraging and jeopardize their deposit. It was crucial to explain the previous years’ low profits and demonstrate that changes in their business status wouldn’t affect future earnings. Spanish banks may not fully grasp the intricacies of self-employment and documentation requirements from other countries.
Justifying the documentation
Working closely with the couple, we compiled a strong application to two banks. We explained that the business had been impacted by the pandemic, and previous lower incomes should not be a concern. Using bank statements and management accounts, we demonstrated the company’s profitability since transitioning from “sole trader” status.
A positive outcome of a family holiday home mortgage
We were thrilled when one of the banks responded positively, just in time to arrange the valuation, formal offer, and notary appointments. The process went smoothly, and the clients successfully purchased their dream home.
It was exciting seeing this family holiday home mortgage turned into a reality!
Conclusion & key takeaway
While a positive outcome can’t be guaranteed, starting the mortgage application process before making a non-refundable deposit is crucial.
Thanks to our strong relationships with various banks and our expertise in compiling and presenting documentation, Mortgage Direct often assists clients in obtaining the necessary mortgage—even when a direct approach to a bank fails.
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