Bank Guarantee - Reqrd for Rental

[Big Pete]

Originally Posted by dupree

thanks, hopefully in the near future I will be able to contribute instead of leach..this is a great forum..lots to read. Funny I just got back from a village to the north of Madrid and it was the same there as well 6 mo Aval though probably room for negotiations...seems they were willing to deal with the "insurance" type option which is like a monthly payment to an agency...anyway.. Thanks again to you both. I am sure I will have more Qs soon.

Buenos dias

Buenosio diasio to you also,

ask away and keep us informed how things go

[chris(madrid)]

Originally Posted by dupree

I am told that in order to sign a lease for a rental property in Madrid that I will have to come up with 1 months rent, 1 or 2 months deposit and 1 months rent for the real estate agent (which is all fine and expected) and, this is the kicker, a bank guarantee for 6 months of rent.

According to the bank, being that I don't own any Spanish assets nor have any credit history in Spain that we will have to deposit 110% of the value of the guarantee and pay 0.5% set-up fee and a fee of 1% each quarter (so I am paying them to guarantee a contract with my own money?). So roughly this comes out to about 20K USD (using an optimistic exchange rate of 1.50)that we have to come up with just to move into an apartment in Spain.

Does this sound right to anyone? Surely there is another way to secure this guarantee...Understanding that I have excellent credit in the US but no collateral to speak of...I do have a car but technically the bank still owns that asset. One agent mentioned an insurance specifically for this but most of the "landlords" of the properties I have seen are unwilling to go this route.

Thanks for sharing your knowledge and experience.

It sounds rough - but seems pretty much what I'd expect.

It's the same way that a US operator wants your credit rating (which as a foreigner you wont have). A US bank will make sure you pay to get it fast! Folk here want their backs protected. Does your US bank have a Madrid branch? - if so have a bit of chat with them!

Depends WHERE in Madrid - if it's a highish demand area - then they wont budge. It can be tough to evict non-paying residents - would take about 6 months as things stand in the courts (maybe longer due to recent strikes). And Insurance companies may also take their own sweet time paying out.

Look outside the City. There are masses of unoccupied flats outside the centre. OK, most may not be in the better areas but the landlords are DESPERATE to fill them - There's been over speculation here and a fair few "smallish builders" who thought they'd backed a winner but got in too late. More availability SOUTH - but North to West is (imo - I live there) nicer.

If you'll be using public transport to get about - expect flats near rail stations to be a bit more hard to find.

[libove]

Would someone please direct me to the insurance option in place of the traditional(?) aval bancario? I have the money, and I understand the legal challenges with eviction and the need of a property owner to protect himself (I am a landlord in the United States); I just do not want to lock up €10,000 in a low-interest account when it better serves me in my general pool of investments. If I can't convince the landlord of an apartment I want to rent here in Barcelona city to simply forego the aval, at least I want the option of paying the equivalent of a US mortgage Private Mortgage Insurance payment, instead of paying about the same in aval fees plus the loss of interest and control in that amount of money!
Thanks!
Jay

[chris(madrid)]

Frankly It wont surprise me if they start getting insistent on the 6months thing - esp on higher end and rural rents. I've a mate whose ex's family own a fair amount of better property in Madrid and they've had few "runners and late payers" since November.

They say they'd prefer to leave them empty than to risk another non payer. Runners are not as bad - except they often take stuff too.

The cheaper end it's my guess they'll be able to re-rent with more ease and may be more flexible.

Read the Insurance type things well. I heard of some issues where folk who've legally left suddenly find they had a min "x" years policy.

[SunnySpain]

Hi there and welcome to the forum,

I think you have a simple choice here, you either do what they want or move on to the next suitable property and see what they say.

At the end of the day, what they are asking for is pretty much the norm for major cities, so you cannot expect a much better deal if the property is of a good standard

Saying that, there are many empty properties in Sessena.

Good luck

[libove]

In the US, if a person buys a home and pays down less than 20% of the home's value, the bank lending the buyer the rest of the money (the mortgage) usually requires the buyer to pay for an insurance product called Privacy Mortgage Insurance (PMI).

PMI insures the bank, not the buyer. It will pay the bank the money owed to the bank by the buyer, if the buyer stops paying on the mortgage.

I have heard that there is a similar option now available to handle the Aval Bancario in Spain for renters - an insurance program that the renter can buy, which will pay the proprietor if the renter stops paying the rent. This would take the place of depositing a huge amount of money in to a break-even-at-best "investment" (the Aval bank account), and would probably cost only a similar amount to the (ridiculous) fees that the renter pays for the "privilege" of the bank operating the Aval (unless of course the renter is actually high risk).

So, what about it - does such an insurance option exist in place of the Aval?

Thanks,
Jay

[Stravinsky]

Originally Posted by libove

In the US, if a person buys a home and pays down less than 20% of the home's value, the bank lending the buyer the rest of the money (the mortgage) usually requires the buyer to pay for an insurance product called Privacy Mortgage Insurance (PMI).

PMI insures the bank, not the buyer. It will pay the bank the money owed to the bank by the buyer, if the buyer stops paying on the mortgage.

I have heard that there is a similar option now available to handle the Aval Bancario in Spain for renters - an insurance program that the renter can buy, which will pay the proprietor if the renter stops paying the rent. This would take the place of depositing a huge amount of money in to a break-even-at-best "investment" (the Aval bank account), and would probably cost only a similar amount to the (ridiculous) fees that the renter pays for the "privilege" of the bank operating the Aval (unless of course the renter is actually high risk).

So, what about it - does such an insurance option exist in place of the Aval?

Thanks,
Jay

I was told the other day in a discussion about Spanish mortgages that every mortgage a bank makes it has to take out an insurance for. In that way they are not at risk in the same way UK banks (Bradford & Bingly) are, and if it all goes horribly wrong then they are covered

[chris(madrid)]

Originally Posted by Stravinsky

I was told the other day in a discussion about Spanish mortgages that every mortgage a bank makes it has to take out an insurance for.

HAS TO? - Branch managers are possibly MADE TO. We were ASKED to when we took ours out - and did.

Also took out life insurance so that if one of us dies - that persons proportion is wiped off the slate too.

iirc Mortgage Protection insurance was just as visible in the UK in the '80's. Though maybe because I then worked in banking - it was more visible to me.