3.3.1. Review your budget
How much can I afford?
Deciding exactly what your budget range is will avoid unnecessary dissappointment in the long run. Do the maths!
You will want to get as much as you can for the money you are willing or able to spend, but will need to calculate how much to invest and how much to hold back for refurbishment, furniture and any unforeseen costs. You don´t want to find yourself burdened with a property in Mallorca you cannot afford to visit, let alone, risk having it repossessed.
Calculate all your costs, your living costs, monthly outgoings and your job security, look into moving costs, if you do not currently live on the island, relocating costs can be considerable, and refurbishment and building costs if you are expecting to do some work on the house, mortgages and house prices are important too.
How much can you borrow and what does it entails in terms of repayments? and if you do overstretch yourself a little, will you be happy with a beautiful house in Mallorca but less disposable money to spend? Some people are more willing to take risks than others, and whether you have savings or family responsabilities will determine how much you want to be a pioneer or play it safe.
What is your budget?
Your budget is the money you have at your disposal, between your own capital and the mortgage or loan you are able to secure. Your capital will be a combination of your savings, family support and assets, and from this you deduct costs for buying, moving and building, which will leave you with an approximation of how much you can put down as a deposit towards your property in Mallorca. Your deposit will be at least 10% of the value of the property.
Your mortgage
Your mortgage will depend on the size of your deposit, any outstanding debt, your income and income stability. If you cannot secure the mortgage you want, you may be overstretching yourself and putting yourself at risk of repossession.
Costs and taxes
In order to calculate exactly how much you can afford to pay for a property in Mallorca you need to work out the total costs involved in buying the property. Calculate the total purchase costs, conveyancing, stamp duty, estate agency, lawyer, surveyor and notary fees, mortgage fees and possible agency fees in the UK if you are selling one home to buy another, and don't forget relocation costs and building work.
Monthly outgoings
Also worth considering at this point are your monthly outgoings, and how much these will vary with the new mortgage. Be sure you can not only afford to buy your property in Mallorca, but also live in it or hold on to it and visit it. Can you afford a rise in interest rates? Have you made allowances for bills or insurance? Will you be able to pay for basic maintenance costs on the property, especially if you are not going to be living in it all the time or planning to let it as a summer rental?