Buying a property in Spain is a relatively easy process, certainly if you read and understand the following guidelines. Before you even consider buying a property in Spain, you should become au fait with the legal procedures and financial transactions you need to carry out throughout the purchase to completion. You will need to budget for between 10% and 11% of the purchase price towards your purchasing costs, a breakdown of these are given under purchasing costs. We would also suggest that you have your finances in place, an idea of what budget you are looking to spend and that you have an idea of what you can expect to get for your money by utilising either our property or latest development search. Should you be looking to apply for a mortgage on the purchase of your property we can have pre-approval and the loan amount agreed in principal within 48 hours, this can be arrange prior to you arriving in Spain.
When you find the property you wish to buy, you will be required to place a reservation deposit of between 3.000 €'s and 6.000 €'s, so it is advisable to make arrangements for this amount to be immediately available, this can increase to 12.000 €'s on higher priced properties.
The deposit can be paid in cash or by credit card, while cheques drawn on foreign banks can take up to 30 days to clear in a Spanish bank and can become a very costly exercise. Bearing in mind that you may lose the property if someone else lodges a deposit before you, it is vital to have this facility organised
Once you have found your perfect holiday home or residential property and you have paid your reservation deposit the property is withdrawn from the market for an agreed period of time. During this period your lawyer will check registries to ensure that the property you desire is free of charges, liens or debts and that all local taxes and community charges are up to date. Once this has been carried out and your lawyer will draw up a private purchase contract, which will detail the terms and conditions of sale between both parties, this generally takes place within 14 to 21 days. At this point ten percent of the agreed purchase price is paid, unless you are purchasing a new property where you will make stage payments as per the developers' payment schedule.
Final completion takes place at the Notary's office, where the public title deeds are signed, the final payment is made and the buyer takes possession of the property. Following the completion, the details of the title deeds are sent to the land registry, and your lawyer will arrange for the transfer of water, electric supplies, etcetera.
The same process is taken for completion on a new property although you will have a period of time to ‘snag' the property and have any potential problems rectified. Quite often you will complete on a new property once the first licence of occupation has been granted. This means that the property has been approved for occupation but, in some cases, the developers may still be completing gardens and pool areas.
It will be more cost effective to employ the services of a local lawyer, rather than one from your own country. Finalising the terms and conditions of sale can be carried out with or without the help of a lawyer, although we would always recommend that you are professionally represented through to completion, lawyers do quite often become an integral part of the negotiation, along with the agent. Lawyers fees are usually roughly 1% of the purchase price. Their services do not stop at only the transaction, they will assist with the opening of bank accounts, connecting utilities and can arrange various residencia documentation.
Whether a resident or not, you can apply for a mortgage on the purchase of a property in Spain. You can arrange the mortgage in any currency, and from any country in the world. A Spanish mortgage however, is only available on completion of the property whereas re-mortgaging an existing property in your home country means you are able to finance any stage payments.
Spanish banks offer competitive mortgages with low rates of interest. Typically, the banks will grant 70% loan against the property valuation to Spanish residents & roughly 50% to foreigners. The period of loan will depend on your age but can extend to 20 years. You will need to provide proof of your capacity to repay the mortgage and most banks will look for earnings per month in excess of three times your expected monthly mortgage repayment.
To apply, you will require the following:
• A P-60 or last tax declaration
• Three months' salary slips
• A bank reference
• Last three months' bank statements
• If your self-employed a statement of accounts
There are, however, possibilities of applying a 50% loan against property valuation with a ‘non-status' type of mortgage. To apply for this you will only require a bank guarantee.
Basically there are three fees and two taxes to pay when purchasing property in Spain. As a general rule of thumb, all purchases of property in Spain need to calculate between 10% and 11% of the total purchase price to cover costs of buying.
Legal Fees: Legal fees are charged out at somewhere between 1% and 2% of the purchase value, plus value-added tax (I.V.A) currently charged at 21%.
Notary Fees: The scale is fixed by law and may range from 300 €'s for lower priced properties to 1.000 €'s for higher priced properties.
Property / Land Registry: They generally come out at around 60% of the notary fees.
The Taxes
Transfer tax: Transfer tax is charged out at 8% for a re-sale property up to 400,000€, 9% on the difference up to 700,000€ and 10% over this amount. I.V.A. is charged out at 8% plus 1.25% stamp duty if buying a new property from a promoter or developer. If you are buying land, commercial premises or garage spaces I.V.A. is charged out at 21%.
Plus Valia: Plus Valia tax is based on the increase of the land value since the last sale. This tax is normally payable by the vendor but can become a point of negotiation and become payable by the purchaser. The amount payable may range between 25 € to several thousands of euros on a larger property.
On-going Costs
Annual running costs on aproperty can vary greatly in relation to the actual featres & usage of a property i.e. swimming pools, large gardens, underground parking etc & below are some examples.
• Community Fees
• Annual Real Estate Tax (IBI)
• Property Wealth Tax
• Property Income Tax
• Utility Services
In Spain it is quite common practice when buying your property to find yourself in the position of co-proprietor of communal property. Such communal property may include swimming pools and gardens, which form part of the whole complex. Each owner will own a percentage of the communal property in relation to the value of his apartment, townhouse or villa as a percentage of the complex as a whole. For example, where there are 10 apartments each with the same surface area and value, and belonging to the ten apartments is a swimming pool, garden and parking, each individual owner will then in addition to owning his own apartment also own one tenth of the swimming pool, garden and parking.
Every community owner will therefore be responsible for payment of his share of the expenses incurred in the maintenance and upkeep of the communal property.
As a community owner you will have certain rights
and obligations.
This Real Estate Tax is based upon the rateable value of your property and can vary from town to town. In Spain the tax Impuesto Sobre Bienes Inmuebles - is more usually referred to as IBI. Payments of this tax can be arranged by direct debit through your local Spanish Bank.
Foreign owners also pay a small amount of "Property Wealth Tax" each year
This tax is generally rated at 25% of all income received against the property.