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Buying a home in Spain

 

The Buying Process

Buying a home in Spain, whether for investment or relocation is a significant decision. It is currently a buyers’ market in Spain, with houses being sold for little money throughout the country so it is a great time to invest.

There are currently an estimated 80,000 British Nationals purchasing property in Spain each year, either with the intention of moving to the country or investing in their future.

It is important to remember however, that the property market in Spain is not regulated as it is in many other countries, including the UK, so the process of purchasing property or land will differ greatly. With this in mind, it is vital that you are fully prepared for the buying process and any eventualities that may occur.

Preparing yourself for your purchase by seeking out reputable and knowledgeable experts, as well as understanding the timeline involved in the buying process will help greatly and ensure that your acquisition goes without a hitch.

 

Timeline of the Buying Process 

  • Find your ideal property
  • Choose a legal expert
  • Apply for a mortgage
  • Organising a NIE
  • Signing the Escritura
  • Post-contract
  • Completion

 

The Buying Process in Detail

If you are planning on buying in Spain, you will probably have already been looking for the ideal property. You may have done this through UK property exhibitions or by flying out to Spain to view homes with an estate agent. Spain Homes has a superb variety of homes available to you and because we only work with the most knowledgeable and respected companies in Spain, you know that you will be getting a trusted service and a property that is perfect for you.

 

Finding a Legal Representative

Once you have begun looking for a property, or if you have already found one, it is important that you seek legal assistance before you think about making a purchase. We will be happy to offer you advice on the most trusted and reputable solicitors in the area to ensure the process goes smoothly. Your lawyer may also be able to act as your Power of Attorney and sign any documents on your behalf if you are unable to get out to Spain regularly.

 

Choosing a Mortgage

The next step after finding your property and hiring your lawyer is to organise your mortgage, if you require one. The mortgage system in Spain is slightly different from the UK so again, working with knowledgeable and trusted experts will make the process straightforward and of course we can recommend the very best in the area.

 

Applying for Your NIE

Obtaining your NIE (Numero de Identidad de Extranjero) is vital if you want to purchase any property in Spain as a non-resident, so this will be your next step. The NIE, which is translated as Foreigners’ Identification Number, is an all-purpose tax number, used for everything from paying your taxes and connecting your utilities to buying a house or car. This should be applied for once you have a property to purchase and will be taken care of as part of your Spain Homes purchase process.

 

Pre-Contract and Signing of the Escritura

Once you have agreed to purchase a property you will need to sign the Escritura. This is the Title Deed to the property and is the most important document you will sign. Prior to signing, your solicitor will search the land registry to confirm who owns the property and whether or not they have the right to sell it. Once you are given the green light to purchase the property, you will be able to complete the process, which will take place in front of a Notary. If you are purchasing a new build or you are making stage payment then a private contact may be required. This is something that we will discuss with you if necessary.

 

Post-Contract

Once you have signed the documentation you will pay your deposit and agree a date for completion. It is also advisable that you arrange a Spanish Will once you have purchased your property. This can be signed at the same time as the Escritura, in front of the Notary.

 

Completion

On the day of completion you will be required to pay all costs and fees associated with your purchase; you will then be the new owners of a Spanish property. Congratulations!

 

Mortgages

After a tough few years, the property market and in particular the mortgage availability in Spain is looking better than ever. Even more good news is that mortgages rates are also continuing to drop as the Euribor rate dips even closer to zero. Property prices are more realistic, choice is extensive and contracts are much more transparent. All this, combined with the excellent value of the pound against the euro and it is quickly becoming the perfect time for buying property in Spain.

But don’t wait until you have found a property to start looking for a mortgage. If you are serious about purchasing property in Spain then it is worth thinking about your mortgage as early as possible.

Although there is much more availability when it comes to Spanish mortgages than there was a few years ago, the process is still a long one and the lending criteria has been tightened somewhat. Having all of your finances and documentation accurate, transparent and up-to-date is vital. As experts in the Spanish property market, we are here to help ensure that you have everything you need and ultimately the best chance of securing the right mortgage for you.

 

Types of Mortgages

Spanish mortgages are offered by banks and savings banks and are obtained directly from them or alternatively, through a mortgage broker. Many of the larger banks have branches in the UK and Spain, so will be familiar to you, but this doesn’t necessarily mean that they will offer you the best rate. It’s always worth shopping around.

As with any mortgage market, the types and costs of mortgages vary greatly from cheaper, flexible mortgages to more expensive, inflexible ones. Spanish mortgages are based on the base rate set by the ECB, however lenders are relatively free to set their own charges and terms beyond that. This means a wide variety of costs and conditions to choose from.

 

Mortgage Costs

  • Stamp Duty - €2,500
  • Arrangement fees - €2,000
  • Notary - €1,000
  • Land Registry - €400
  • Life/Home Insurance - €1,000
  • Surveys - €350
  • Management - €300

*Based on a €100,000 mortgage

 

Variable and Fixed Rate Mortgages

In Spain, the majority of mortgages are variable and vary according to the ECB base rate. A less popular choice is the fixed rate mortgage (less than 3% of Spanish mortgages are fixed) which may or may not be beneficial, depending on the current interest rates.

It would be unlikely for you to be able to get an interest only mortgage in Spain today.

Rates for Spanish mortgages vary quite considerably but range from 2.5-3.5% above Euribor for variable rate mortgages.

 

Documents

When you are ready to apply for your Spanish mortgage you will need specific documentation. It is worth getting the majority of this together as soon as you can to minimise the waiting time for your mortgage.

  • Proof of UK residence – this can include a UK driving licence, council tax bill or passport.
  • Bank statements covering the last 6 months – these will be required to declare your income and outgoings over that period.
  • Wage slips for the past 3 months – If you have been working you will need to provide your 3 most recent wage slips along with your latest P60.
  • If you are self-employed – you will need to provide your accounts for the past 2 years as well as tax returns for the past 2 years and proof that you have paid your income and tax payments.
  • Additional sources of income – If you wish to borrow against these you will need to provide proof of them.
  • Pension details – Details of any pensions you are in receipt of.
  • Buy to Let property details – If you own any buy to let property you will need to provide details of any tenancy agreements.

It is worth noting that if you are applying for a Spanish mortgage you will most likely have it paid in to your account in euros. If you do not live or work in Spain then it may also be worth employing a trusted currency exchange service to help you make sense of the foreign exchange rates and ensure you get the best value for your money. We would be happy to provide you with a list of professional and reputable firms who will be able to advise you.

 

Buying Costs

When purchasing any type of property in Spain there are a set of additional costs to pay on top of the cost of the property and any agency costs.

The primary costs are taxes and fees. Spain has introduced 2 different taxes based on whether you buy a new-build or resale. New-build property is considered a business transaction, and therefore is liable for Spanish VAT at 10%. Resales are personal so the government has created the Transfer Tax which is 8% in Murcia and 10% in Valencia.

Every purchase also has to go through a public notary, land registry office and incurs legal fees.

There are other smaller costs involved, including electricity and water connection on new builds, insurance needed etc. In general we would estimate an additional cost of 12% for purchasing a property in Spain. Build in a further 6% for your mortgage fees if that is required, though this depends on the amount you are mortgaging.

 

Additional Buying Costs

 

Tax Resales (transfer tax) - 8-10%

New-build (VAT) - 10%

Notary - €900

Registry - €250

Legal fees - €1,000

Water/Electric (new-build) - €600

*Based on a €100,000 mortgage

 

Renting out Your Property

If you are not purchasing your Spanish property to live in full-time then you may be considering the option of renting it out throughout the year. Whether this will be for a couple of months a year or more you will need to ensure that you are still able to look after your home while you are away from it.

Determining how you will manage your investment property is possibly one of the most important decisions you will make after purchasing it. Choosing reliable and professional owner services will not only put your mind at ease while you are not in your Spanish property but will also save you a great deal of stress should any issues arise in the future.

 

Short Term Rentals

Owning your own holiday home in Spain is an extremely rewarding experience. In order to ensure that your property continues to be a valuable investment it will be necessary for you to find a professional and trusted property management company.

Being able to visit your new property on a regular basis to keep an eye on the condition can often be an inconvenience to you, both in regards to time and money. The smaller, more regular property maintenance jobs within your holiday home such as general housekeeping, pool cleaning, repairs and landscaping are something that can be expertly handled by a professional property maintenance company at a reasonable cost, allowing you to enjoy your investment and get the most from it.

Once you have made the decision to rent your property out for short periods of time we would be happy to advise you on reliable property management companies, rental companies and guest services, all of whom will work hard to protect your investment and keep your property running smoothly for you and your guests.

Some of the services offered by our property management companies include:

  • General housekeeping duties such as changing linens, vacuuming and dusting.
  • Home inspections after each rental period.
  • Regular general home maintenance including changing light bulbs, testing smoke alarms, air conditioning services and minor repairs.
  • Landscaping, cutting the lawns and irrigation.
  • Pool cleaning and maintenance.
  • Pest control.

 

Long Term Rentals

Offering your Spanish property as a long term rental is an investment and as such you will want to get the best return on that investment. Our many years in the industry and relationships with experienced and professional property companies throughout Spain means that with us you will get the most out of your investment and can be assured that your property is in safe hands while it is rented.

If this is your first rental property it may be an overwhelming prospect to think about leaving your house to your tenants. Managing your own property may be possible if you have previous experience although we feel that it is advisable to seek the assistance of experienced property management services to ensure your home is in safe hands and your investment is protected.

With comprehensive services tailored to overseas investors, our recommended companies will do all the hard work for you, allowing you to enjoy the benefits of having your own Spanish rental property.

Some of the long-term rental services offered by our professional management companies include:

  • Sourcing trustworthy and reliable tenants for your property through successful marketing and screening processes.
  • Lease negotiation between you and your tenants.
  • Collecting the rent on your property.
  • General maintenance within the property and grounds including housekeeping, pool maintenance, landscaping and repairs.
  • Dealing with any queries and complaints from the tenant.
  • Offer of a 24 hour emergency line, should you need it.

 

Types of Property Build – Resales

After the wave of uncertainty that came with purchasing property in Spain in past years, the market is back on the up. We are now seeing that a large proportion of homes being purchased are resale properties, being purchased by overseas buyers and foreign residents.

The reasons for this sudden surge in purchases include the improving exchange rate, a keen interest in investment from the UK and the many draws that Spain has to offer overseas buyers.

Currently, many of the properties that are available in Spain are resale, which means that they have been previously owned and occupied. Looking at today’s market, there are a huge number of properties available that represent excellent value for money as well as a great investment opportunity, despite often being slightly more expensive than a new build home.

It is important to be aware that the resale properties that are available are not necessarily of a lower quality than a new build home. As with homes in the UK, the variety of property available can be anything from a charming cottage, perfect as a renovation project, to a 3 year old modern apartment on the coast which comes fully furnished with all the latest fixtures and fittings.

When choosing your resale home it is important to understand why you are purchasing it – are you looking to rent it out or live in it? Then with our experience and knowledge of the local areas, including any future development plans, demographics and fees that may be involved in your purchase or renovation, we will be able to help you find your perfect property.

 

Choosing a Resale Property

Depending on your specific requirements, there can be a number of advantages to choosing to purchase a resale property. One of the more obvious advantages is that it is already built, established and ready to move in to in most cases. You will already have access to a variety of local services as well as working utilities and developed surroundings which, whether you are hoping to relocate to the property or use it as a holiday let, will make the whole process more straight forward.

Purchasing a resale also allows you a much wider scope of properties. Unlike new builds which are often very similar, a resale property will have been built to its own specification and as such will offer a great deal more character and originality – especially if you are looking for an older property such as a country cottage. Along with the character of many resale properties, you will also benefit from more space and a larger, more established garden, all adding to the value of the home.

If you are new to Spanish property or are apprehensive about the thought of purchasing an overseas home then choosing a resale can often make the process a little less stressful. Without having to worry about what the finished product will look like, you will be able to view the home as many times as you like and come up with a clear plan of what you would lie to do to improve it, if anything. Being able to negotiate on the price is also a valuable tool – everyone likes to know they are getting a good deal.

 

Timeline for Purchasing a Resale Property

If you think that a resale property will offer all the advantages and value for money that you are looking for when purchasing a property in Spain then there are a number of steps to take to ensure you can proceed with little stress.

View a number of properties before choosing the right one for you.

Once you have found a property, check that the vendor legally owns it. You can do this by looking at the escritura or checking the land registry. Your solicitor will also be able to guide you through this step.

Open a Spanish bank account to pay for your new home.

Apply for your NIE number which you will need to purchase property in Spain as a non-resident.

Make the initial deposit payment on the property to secure it and take it off the market.

Once you have completed all the necessary searches on the property you can then sign the purchase contract. This will need to be drawn up by a solicitor experienced in conveyancing.

Complete the sale. This will be done when both parties sign the escritura, which is drawn up by Public Notaries, rather than a solicitor.

Pay the final monies to the vendor and ensure that all other fees and charges have been paid to the correct individuals. You will then receive the keys to your new home!

All of the steps in this process will be overseen by the experienced team at Spain Homes so you can be sure that your purchase is in good hands.

 

Summary of Resale Properties

  • Built and ready for you to take ownership
  • Immediately available for rental return
  • Unique properties often built to owner specifications
  • All funds are held with Title Company in a state regulated escrow account
  • Convey only on a Special Warranty Deed to ensure maximum protection for the buyer
  • Available for personal use and for both Short Term and Long Term rental

 

Types of Property Build – New Build

In the last decade Spain has seen a huge increase in the amount of land that has been developed in to luxury homes.

According to Euroconstruct, a consultancy group, this increase of over 30% means that over one third of all new build homes in Europe have been built in Spain in recent years. New builds have become popular with investors as they are likely to have a good resale potential in the future, meaning a strong investment opportunity.

The new builds in Spain include all types of housing, from smaller town houses and city apartments to luxury villas, beach front properties and even large scale golf and marina developments. Many of these properties form part of purpose-built developments, especially in some of the popular tourist areas such as the Costas and the Balearic and Canary Islands.

Many new homes that are sold are done so before they are built – known as ‘off plan’ sales. It may be possible for you to view a show home before you buy, but you will usually not get to see your finished home for around a year to 18 months in most cases.

Working with us, you will have access to our knowledge of some of the best new build properties in the area. We have close business relationships with some of the most respected developers and property companies in Spain, so finding your dream new build property will be a stress-free and straightforward process.

 

Choosing a New Build Property

There are many advantages to choosing to purchase a new build home. If you are quick off the mark and find new build homes in the very early stages of development you can often get a considerable discount on the price.

Although you may find that many new builds will have less square footage and smaller gardens than resale properties, you can be sure that the home you purchase will be a fixed cost, meaning that you will be very unlikely to have to spend any money renovating or improving your new home. This is very useful if you are planning on renting out your property as you can be confident that you will not be hit with any large bills in the near future. You will also be able to let it out immediately and may be able to ask a higher rent.

If you do choose to buy a new build home, you will almost certainly be purchasing it before it is complete. This means that not only will you have longer to save for your property and organise a suitable mortgage, but you will also have the option to choose your own fixtures and fittings. This can be important if you are planning on moving in to the home yourself as it allows you to create your dream home.

New builds offer many advantages when purchasing a Spanish property, but it is important to remember that in many cases the home has yet to be built so it is vital that you are able to keep in contact with the builders and property developers to ensure that what you are purchasing will be very close to the final build.

 

Timeline for Purchasing a New Build

If you feel that a new build is the right type of property for you then this timeline will give you a good idea of the steps to take before securing your purchase.

  • Choose your perfect property with the help of our skilled team.
  • Cary out the necessary checks on the developer or builder – search online for reviews and recommendations and find out exactly what the plans and specifications for your potential new home contain.
  • Ask for copies of all legal paperwork for your solicitor to check through.
  • Your solicitor will check through all the paperwork including ensuring that the development is council approved and that there is sufficient insurance covering the build.
  • Make your reservation payment – this can be around 30-40 percent of the total cost and is to be paid within a month of reservation. The rest will be required throughout the building process.
  • Signing the contract once it has been checked over by your solicitor.
  • Once the build is complete it is up to you to check over the property and ensure that it meets your expectations and the individual specifications.
  • Once you are satisfied with your new home you will be required to pay off any outstanding monies and sign the title deeds.

You will then own your new home!

 

Summary of NEW BUILD Properties

  • You have the ability to customize and upgrade a new build property
  • Costs can vary depending on the stage of completion
  • Can take time to complete the build process
  • You pay in stages rather than all upfront

Only deal with builders that have an established track record