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FAQs

Do I have to pay capital gains tax if I sell the property in the future?

Capital Gains is very simple and straight forward especially for investors. There is a 15% capital gains tax on the profit of the sale of your property. However if you re-invest the funds, even the capital gains there is zero tax!

What types of property purchase are there in Spain?

There are generally 2 types of property purchase available in Spain - resale and new build. New build is pre-construction, and generally sold off plan. You receive a better quality construction, with the latest building specifications. Resales are simply homes that have already been lived in.

Types of Mortgages available in Costa del Sol

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.

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.

Types of Mortgage available in the Costa Blanca

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.

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 in Costa Blanca

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, 10% in Valencia and between 8-10% in Andalucia depending on the price of the property.

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: €350

Legal Fees: €1000

Water/Electric (new build): €600

* Based on a €100,000 mortgage

Buying costs in Costa del Sol

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, 10% in Valencia and between 8-10% in Andalucia depending on the price of the property.

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: €350

Legal Fees: €1000

Water/Electric (new build): €600

* Based on a €100,000 mortgage

What is the buying process in Portugal

Once you’ve found your dream Algarve property and made an offer which is acceptable to the vendor, the next stage is to officially reserve the property and have it withdrawn from the market whilst all of the legalities are arranged.  A reservation agreement is drawn up between the buyer and the seller indicating the basic terms of the sale with a reservation deposit of €6000 required to be held in your lawyer’s client account.  Your chosen lawyer will then commence the necessary due diligence and preparation of the contractual paperwork. 

  • Appointing a Lawyer
  • Applying for a Mortgage
  • Due Diligence
  • Promissory Contract - The Promissory Contract (CPCV) is a legally binding agreement between the purchaser and the vendor which formally lays out the basis of the property sale including the agreed price, timescales for completion and penalties for non-compliance.  
  • Completion - Finally, the purchase is completed with the signing of the deed of transfer (Escritura de Compra e Vende) and notarisation of the deeds, together with payment of the balance of all outstanding funds, taxes and fees.  
  • Purchase Costs - The agreed purchase price is not the only cost which needs to be taken into consideration when buying a home in Portugal. As in other countries, there will be a number of fees and taxes that will need to be budgeted for in your calculations. The main ones are;
    • Purchase Tax 
    • Annual Municipal Tax 
    • Solicitors fees 
    • There are also a number of other ancillary charges including Notary Fees of approximately €750 and Registry fees of approximately €500

As a general rule of thumb, we recommend allowing for approximately 6 – 8% of the purchase price to meet your purchase costs although the reality is that the final fees are often less than this figure. 

 

What mortgages are available in Portugal?

Portuguese mortgages are available from banks and it is best to obtain one directly from them or through a reputable mortgage broker. You will find that some of the larger banks will have branches in the UK as well as Portugal. You may not get the best rate from these familiar banks so it is always worth shopping around to get the best deal.

You will notice, as with the UK mortgage market that the costs associated with a mortgage can differ greatly, as can the variations of mortgage. You will also need to pay a deposit when taking out a mortgage; this deposit will usually be anywhere from 30% of the total property price but will depend on the individual lender and the status of the individual borrowers. 

Variable and Fixed Rate Mortgages 

As with the UK, you will have the choice of two kinds of mortgage; a variable mortgage and a fixed-rate mortgage. The interest rate of a variable rate mortgage in Portugal is linked to either a three or a six month Euribor rate, which will then be increased by the lender. 

A fixed-rate mortgage is a more budget-friendly option as you will be given a precise monthly cost that will be fixed for a set number of years. This period can range from one year to 30 years. After the specified term your mortgage will automatically switch to a variable mortgage.

When applying for your Portuguese mortgage you will need to have a number of documents available: 

  • Proof of residence in the UK – this can include documents such as driving licence or utility bill.
  • Passport – This must be a valid UK passport.
  • Bank statements – It is worth collecting at least 6 months’ worth of bank statements which should show your savings as well as all your income and outgoings over that period.
  • Wage slips – If you have been earning a wage you will be required to provide your last 3 months’ worth of wage slips along with your most recent P60. 
  • Tax Returns - If you are self-employed you will be required to provide your business accounts for the previous 2 years as well as your tax returns for that time.
  • Additional sources of income – If you wish to borrow money against any additional sources of income you must provide details of them.
  • Buy to let property documentation – If you are the owner of any buy to let properties you will be required to provide documentation relating to any tenancy agreements.
  • Copy of the Promissory Contract – This provides details of the conditions of sale.
  • Portuguese Fiscal Card – your Portuguese tax identification number. 

Finally, if you are applying for a Portuguese mortgage you will almost certainly need to deposit your deposit money in to a euro denominated bank account. With this in mind, we would recommend speaking to a trusted foreign currency exchange expert to ensure you are getting the best exchange rate and value for your money. We would be happy to discuss this with you and offer you a list of some of our favoured companies. 

 

What documents would my lawyer have to submit when buying in Portugal?

In order to finalise the purchase of your house, you must submit various documents that identify the property and that confirm the legitimacy of the owner and the buyer:

1. Land Registry Certificate (Certidão do Registo Predial)

The information made available by the land registry tells you about the composition of a certain building, the legitimacy of the person intending to sell the property and the types of encumbrance that may affect it (mortgages, collateral, etc).

The land registry certificate may be requested in the following ways, in hard copy or in digital format:

  • In person, at any land registry office (Conservatória do Registo Predial) (see list). This entity holds full descriptions of properties;

  • It is possible to request a permanent land record certificate and simplified land information through the Predial Online website.

2. Title Certificate (Caderneta Predial)

This document may be requested from any tax office. It contains information about the property's tax situation and can be used to find out which entity is responsible for meeting fiscal obligations related to the property.

  • Property owners can get the title certificates for their properties from the tax authority website;

  • A title search of an article in the land registry may be requested instead of a title certificate (this is only valid for one year);

3. Usage Licence (Licença de Utilização)

The purpose of the Usage Licence is to certify the intended use of the property, and that it is suitable for its licensed purpose. This licence must be requested from the City Council of the district where the property is located. However, proof of the licence request may be submitted along with the purchase agreement if the licence is yet to be issued.

4. Housing Technical Datasheet (Ficha Técnica de Habitação)

The Housing Technical Datasheet is a document that describes the main technical and functional characteristics of a property. It must be requested directly from the City Council of the district where the property is located.

Do I need a lawyer when buying on the Costa del Sol?

We always recommend using a Spanish lawyer from the start. Your Spanish lawyer will undertake all the proper searches to verify that all outstanding debts have been paid. It is  important that things such as property tax, energy bills and community fees have been paid by the vendor before you sign the title deed as in Spain debts are transferred to the new owner. Your lawyer will also register the title deed in the Property Registry and will check the land rights. Usually they also change electricity and water rights into your name. It is not advisable to use the lawyer from your home country, because he would have to use a local Spanish lawyer regardless. IHG can recommend lawyers we work with regularly, English speaking lawyers specifically for foreign buyers.

Do I need a lawyer when buying on the Costa Blanca?

We always recommend using a Spanish lawyer from the start. Your Spanish lawyer will undertake all the proper searches to verify that all outstanding debts have been paid. It is  important that things such as property tax, energy bills and community fees have been paid by the vendor before you sign the title deed as in Spain debts are transferred to the new owner. Your lawyer will also register the title deed in the Property Registry and will check the land rights. Usually they also change electricity and water rights into your name. It is not advisable to use the lawyer from your home country, because he would have to use a local Spanish lawyer regardless. IHG can recommend lawyers we work with regularly, English speaking lawyers specifically for foreign buyers.

Do I need a lawyer when buying in Portugal?

We always recommend using a  lawyer from the start. Your  lawyer will undertake all the proper searches to verify that all outstanding debts have been paid. It is not advisable to use the lawyer from your home country, because he would have to use a local lawyer regardless. IHG can recommend lawyers we work with regularly, English speaking lawyers specifically for foreign buyers.

What are my exit strategies? Can you sell the property for me?

Exit strategies are simple as well, once you decide to sell your property we can list and market the property to the local market and are average time of sale is 4 weeks. With the property market coming back as strong as it is in Florida, homes are selling as fast as they were in 2005.

For investment properties, how are tenants sourced & qualified?

Tenants are always a tricky part of real estate investing. Fortunately we work with a premiere property management company (Rentals Orlando) who uses a very strict screening process for prospective tenants including credit check, background check, employment confirmation, previous landlord referrals and first month rent + security deposit.

What types of tenants rent properties in Central Florida?

The average tenant is a family of 4 with a husband/wife and 2 children with a household income of approximately $65,000. In Florida the tenancy laws favor the owner, not the tenant so there is very rarely any issue. The average property will receive 8-10 rental applications so you are surely going to get the best qualified tenant.

How is the property market forecasted to perform in the near future?

The Forecast appreciation for foreclosed properties over the next 3 years is 22%.

Do I pay income taxes in US & UK?

There is no double taxation between US and UK. You will File Income Tax in America, however the amount of “NET” income after deductions and credits you will not actually have to pay any tax on that amount since it does not break the threshold of income-owed-tax.

Are the monthly fees high on investment properties?

Depending on the specific property, the monthly expenses are very minimal which is why we are able to provide the best income producing investment properties. Typically $250 per month covers taxes, insurance, and management. Any expense such as community fees or maintenance the property management company will pay through the rental income.

What if I decide to sell my property in the future and it needs work? How much would that cost me?

You could completely renovate a typical 1,200 square foot investment property to full move in standard for less than $4,000 after 3 years and that would include interior paint, carpet, fixtures, kitchen refinishing, etc.

Does America Homes have some form of on-going or yearly fees?

After the initial sale of the property, there are 0 fees paid to us. The management company fee is 10% of rental income which is the industry standard however Rentals Orlando offers far more services and value than the standard property management company since they specialize in foreign investors!

Being foreclosures, could quickly sell the property for me for an immediate profit?

We would happily ‘flip’ the property to a local buyer for a quick $3,000-$5,000 for you, as we have seen offers are come in daily so if you wanted to just purchase it and sell it off to an owner occupant that is not a problem. However keeping the property for at least a year, taking advantage of the cash flow (collecting $8,000+) for a year then selling it for even higher profit (Orlando market forecast is 8-10% increase in 12 months) given the way the market is moving would be more lucrative for you (going from a $3-5k profit to a $15-20k profit in one year when factoring in the cash flow).

What are my exit strategies? Can you sell the property for me?

Exit strategies are simple, once you decide to sell your property we can list and market the property to the local marke. With the property market coming back as strong as it is in Spain, homes are selling as fast as they were in 2005.

How do I rent my home to pay the mortgage?

Firstly, you can never guarantee you can always fill your home with holiday makers year round, so we always say you should be in a position to pay the mortgage regardless of rental return. Saying that you can put yourself into a position of having the best possible chance of producing more in rental income than the cost of the property, turning into an income producing asset. To do this firstly, choose a new build. These are newly built homes that modern rentees, and rental management agents, want to use. Secondly - buy with IHG! Tell us that is your preferred option and we will source the properties that best fit that criteria taking into account amenities, location and costs along with what you require as a part-time user of the home. You will need a rental management company that takes care of the property, promotes it, manages the rentals and cleans/fixes afterwards. IHG have several recommended suppliers that we work with regularly in each region that we can introduce. You will need furniture, and if you choose a newly built home it is often best to pick a ‘furniture package’ from a high quality supplier which we can again recommend.