Will bank check with oversea bank

Paoblodiablo77

Hi Everyone,

Just a quick question, I am living in Spain and I have a loan on a small development of 6 apartments. The work is ongoing and the loan is paid in stages in arrears as the work is completed, the bank "owe" me €100k on the work I have done and another €200k on work yet to be completed.

I want to apply for a mortgage in Ireland to buy a home there as I want to return there to live probably next year.

The question I have is this, I have been asked for 6 months bank statements for my mortgage application, I need to know if the bank in Ireland will contact the bank here in Spain to verify the bank statements and savings account because if they do, it will cause me untold hassle with this current mortgage I have in place in Spain. Most likely the bank here, if they found out I was applying for a mortgage in Ireland, they would pull the remainder of the payments on this mortgage leaving the development unfinished.

I have been offered a house in Ireland at a really, really good price, otherwise I would wait until I was finished here, but I need to sign contracts on this house in Ireland in the next couple of months to get it.

If however, they will accept original bank statements and they don't need to contact the bank over here everything will be ok!

Many thanks for any information or advice offered.

Regards

E

dotsman

I'm not quite sure what you mean by your Spanish bank "owing" you money. I though you had the loan with them (and, thus, owe them)?

With regards a mortgage application here, you will need to (and should) declare the financial dealings in Spain.

I'm not sure why you are worried about the Spanish bank "finding out" you are buying property here. As long as you are not trying to use the Spanish property as collateral etc for the Irish loan, I can't see how their interests would be impacted.

To be honest, without detailed info, it is hard to say what the Irish bank will do with regards contacting the Spanish bank. What is it that the statements show?

Paoblodiablo77

Ok I definitely didnt make the question very clear.

Dealing with the Spanish Bank is like trying to do a double sided jigsaw in the dark with mittens on.

When I say that they "owe" me I mean that the bank only allows me draw down funds as I complete the work on site. i.e. when all of the internal walls and plastering is finished, I call their assessor and he signs off on a payment from the bank to my company. WHen tiling and bathrooms are finished they make another payment and so on. I am waiting on 105k from them since the end of December and I have to complete another 200k's worth of work.

The bank, in my opinion do not want to complete this loan transaction with my company. They would definitely pull the plug on the loan if they found an excuse. I have had endless problems with them. Th bank are fearful that I will not be able to sell the apartments when they are finished, but obviously, if I don't finish them, I will never sell them.

They were pretty inefficent to start off with, but they have been dragging their heels on everything lately.In contract they have 10 days to put the money in my account from when I call the assessor, for the last payment, they took 119 days. This is crippling because it causes huge problems with my contractors.

My fear is, if AIB contact this bank directly, by email or phone etc. and announce I have applied for a loan in Ireland, the bank could use this as an excuse to further delay and frustrate this process. By law, as a director of the company with the loan, I must be resident in Spain, they could claim a million excuses not to go ahead, they could just say that they need to "look into it" and the delay of that would be enough to put the company under.

There is no ombudsman, no customer service department and when they took so long to make the payment to me the last time, I asked our solicitor to write to them and he actually cracked up laughing and told me that one does not "write" to the banks, the banks, write to you. When he had finished laughing, he said that if I went against them I would never get the money, if I had to take them to court, it would take 3 years for the first date and the bank would automatically appeal every loss to a higher court (as is their right) until I couldn't afford it anymore. In addition, the 119 page mortgage contract covers the bank for almost every eventuality, so I would probably lose anyway if I took them to court.

There is no underhand dealing on my part here, I have a good job and regular savings, I'm just really tired of living her and dealing with this nightmare and I want to try and start organising to come home, this house in Ireland is a fantastic first step towards that dream, but if the Irish bank will contact the Spanish bank, it's probably not worth it.

Thanks for the assistance.

Peregrinus

From what you say, your ceasing to live in Spain would be a breach of your company’s loan covenants with the Spanish bank, which would entitle them to try and close down their loan with you. And you suspect that, if they had that right, they would take it.

You’re asking us whether the Spanish bank will find out about the breach as a result of your Irish bank contacting them to verify information. There are three answers to this question.

First, we don’t know, but it’s certainly possible.

Secondly, if they don’t find out through the mechanism you suggest, they may well find out in other ways. I’ve no idea what kind of information-sharing there is between European banks in relation to credit rating, etc, but if you mortgage Irish property to an Irish bank, this will be a matter of public record, and as it relates to something that interests your Spanish bank, you should assume that sooner or later they may get to hear of it.

Thirdly, I think you may be asking yourself the wrong question. You’re asking “will my Spanish bank discover a breach of the loan covenants?” but you should first of all be asking the question “do I want to be in breach of the loan covenants?”

Breaching your loan covenants is risky, and puts you in a very, very vulnerable position with your Spanish bank (and your Irish bank also, incidentally). Any strategy which depends on your getting away with a breach of your loan covenants is very, very high risk. We can’t tell you that your Spanish bank will, or will not, find out about the breach, but it is certainly a very real possibility.

Before you do anything, talk to your bank, and explain that you are thinking of spending more time in Ireland for personal/family reasons. Find out if this would affect their attitude to the loan. That will give you better information as to the risks you are running and, if you do decide to run them, strengthens your hand if and when the bank learns you have applied for a mortgage in Ireland. (“I told you I wanted to spend more time there.”) Simply buying or owning a house in Ireland does not mean that you are resident there, but if you have been at all covert the bank is more likely to be suspicious that you have, in fact, ceased to be resident in Spain.

Paoblodiablo77

Thanks for the answer, I will have to consider the next step, unfortunately talking to the bank is not an option here, it just isn't the same business relationship as I would have had with my Irish bank.

It's so frustrating, the bank has a loan of 300k on a building worth 1,4m-1,6m, when we have completed the bank will have loans of almost 600k on a building worth probably 2m basing price on the lowest possible price per sq.m for this city.

Anyway, thanks again for the response, I will think over what the best approach is.

Regards

Peregrinus

It might be worth talking to a lawyer, to see what your rights are, or to a finance broker or similar, to see whether you can refinance with a bank with a slightly better approach. If the finances and security are sound enough, a bank should be glad to have your business.

Liam D Ferguson

I can't give you a definite answer, but I will say this: -

• Mortgages for non-residents are notoriously difficult to obtain at the moment. You might find that your Irish bank just won't want to lend to you because you're living in Spain.
• If you do find a bank in Ireland that's willing to consider your non-resident application, the Irish bank will certainly want to know everything about your affairs in Spain - bank statements, loan statements, assets and liabilities etc.

I think your worry about the Irish bank making contact with the Spanish bank might be academic. Once the Irish bank is aware that you have property development loans in Spain on an unfinished property, my feeling would be that they won't want to lend here.