General Guidelines for Buying Property
To ensure we can help you purchase the property that best meets your requirements it is most important that you take the time to sit back and really think about your reasons for buying a new home in Spain. The questions below will help you identify what your priorities are:-
What type of property do I need ?
How will I use the property ?
What are my general requirements ?
How important are local facilities to me?
Preparation - Before you arrive in Spain:
The best tips !
When You Find a Property You Would Like to Purchase
Find a Lawyer
Making the Offer Official
Arranging Contracts
Completion
Registration
Overall Purchase Costs
Fee Structure
Purchase Taxes
Mortgages:
Mortgage Documentation
Bank Valuations
Annual Taxes
Municipal Taxes
What type of property do I need ?
Villa with manageable plot and away from the town centre ?
An apartment in the middle of town near to everything ?
A town house within walking distance of the main amenities ?
Country house with land and peace and quiet ?
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How will I use the property ?
Will it be your main residence or are you seeking a holiday or future retirement home ?
Do you plan to work or start a business in Spain?
If you’re seeking a second home will it mainly be used for long weekends or for lengthier periods?
Do you plan to rent all or part of the time to offset mortgage and maintenance costs?
Can you live in a Spanish dominated area ? Ie:- You already speak or are planning to learn Spanish or will you want to be in an English speaking area - If you need to be understood for work or require English speaking friends and activities.
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What are my general requirements ?
Minimum number of :-
Bedrooms ?
Bathrooms ?
Size and type of garden ?
Parking - Private garage or parking space ?
Size and type of plot or land ?
New build / Resale or with work to do ?
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How important are the following to me ?
Patio ? Roof terrace ? Views ? Orientation ?
Swimming pool (communal or private) ?
Proximity to amenities such as supermarket, shops, schools, banks, medical care etc.
(walking distance or up to 30 minutes drive) ?
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Preparation - Before you arrive in Spain:
Speak to your local Bank Manager or Mortgage Broker !
It places you in a much stronger position if you have your finance or funds in place beforehand and therefore know exactly how much you can afford before you start house hunting. It is heartbreaking to find the property of your dreams and then lose it because the funds are not immediately available to you.
You will also need to arrange access to sufficient funds whilst in Spain to pay the reservation deposit of the property you are looking at. The minimum requirement to take a property off the market for 30 days whilst you are checking out the legals is usually 6.000 Euros but this figure may increase according to the value of the property.
Reservation deposits can usually be paid with credit cards or cash. Cheques are not normally recommended because they can take between to ten to fourteen days to clear. This delayed time period could result in losing a reservation on a property to someone else who has the reservation deposit to hand.
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The best tips !
Be realistic about what you want and prioritise your requirements.
Set your budget limit and stick to it.
Have your finance or funds in place before you start to look for your property.
Visit the property and have a good look around the area at least twice before you make a decision.
Make sure to visit the property on different days and vary the times.
(e.g. early morning, during working hours and at night time, week day and weekend).
Be prepared to compromise. Make sure you find a property that both you and your partner agree on.
Take photographs and notes on each property so it is easier to review the information later on.
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When You Find a Property You Would Like to Purchase:
Find a Lawyer:
The Spanish word for Lawyer is "Abogado". This is equivalent to a Solicitor or a Barrister in England or an Attorney in the United States.
You will need to employ the services of a lawyer to ensure all legal guarantees for the purchase of the property and that all Spanish legal requirements are met.
Your appointed lawyer can also assist if you want to negotiate the purchase terms and/or price and ensure all your agreements are reflected in the purchase agreement
Lawyer fees are generally lower than those charged by lawyers in northern European countries and are usually calculated as a percentage of the sum involved.
It is important to know that you can use a lawyer from your home country however it could substantially increase your legal costs and may delay the purchase process. This is because your Lawyer may not be familiar with Spanish Law or be able to check out the necessary details with the Land Registry office etc... Most people therefore find themselves paying their Lawyer at home who then appoints a local Spanish Lawyer on carry out the work on their behalf. ie:- You end up paying two sets of Lawyer fees !
Please note that buying without a lawyer’s advice is not recommended.
If you don't already have a local Lawyer then Amigo Properties can recommend experienced, reputable, independent lawyers who specialise in property conveyances and are fluent in your language.
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Making the Offer Official
Following verbal agreement between the seller and yourself the offer will need to be formalised in writing.
The aforementioned reservation deposit is usually required until the private contracts are exchanged.
Reservation deposits can be held in an Amigo Properties client account or your appointed lawyer’s account until the sale is completed.
However the reservation deposit is paid - ensure a receipt is provided and the terms of the payment are clearly specified
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Arranging Contracts:
When an agreement has been reached and the offer has been accepted by the Vendor then a private "option to purchase" or "purchase agreement/sales" contract is prepared where the terms of the purchase are signed and exchanged.
All the agreed terms of the offer and sale e.g. legal description of the property, purchase price, form of payment, date of completion at the notary, date of possession will be reflected in the private contract of sale or option.
Your lawyer will have completed all the necessary legal searches and investigations on the property beforehand to ensure that the property is free of encumbrances, charges or debts, and that all payments, such as community charges are up to date.
At this point it is usual to pay 10% of the purchase price.
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Completion:
Once the public title deeds of purchase are signed before a notary and the final payment is made, possession is given to the buyer and so the sale is formally completed!
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Registration:
The notary will contact the local land registry with the title deeds
Your appointed lawyers will co-ordinate the relevant transfer taxes and the formalities of the registration of your title deeds.
Final registration of the deed may take up to two months.
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Overall Purchase Costs:
There are three fees and two taxes you must take into account when purchasing property in Spain. As a guideline, it is normal practice to add 10% to the purchase price of the property to cover these.
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Fee Structure:
Legal Fees
Minimum fees of 1,200 -1,800 Euros or between 1% - 1.5 % of the purchase price whichever is the greater, plus value-added tax (IVA) currently charged at 16% on the fee amount.
Notary Fees
This scale is fixed by law and may range from 350 Euros for lower priced properties to 950 Euros for higher priced properties.
Land Registry
Property Registry costs are approximately 60 – 65% of what the notary charges
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Purchase Taxes
Transfer tax (ITP)
Before a title deed can be registered into a new owner’s name, or a deed issued for a newly constructed building, transfer tax has to be paid by the buyer.
It can come in two forms and these are calculated on the declared purchase price on the title deeds:
7% IVA (VAT) plus stamp duty (AJD) at 1% is payable on a new property bought from a developer or promoter
7% IVA (VAT) is payable on re-sale property
16% IVA (VAT) is applicable when purchasing plots of land, commercial premises or garage spaces.
NB: ‘Plus Valia’ tax is normally payable by the vendor but it may be stipulated that the buyer pays. This tax can range from 200 hundred Euros to several thousand Euros on larger properties with a lot of land. There are several variable factors used in calculating this tax (location, area of land, building volume permitted, period of ownership of vendor). This tax must always be verified before proceeding with the purchase by your lawyer.
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Mortgages:
Spanish banks are quite willing to lend to non-resident purchasers of real estate.
Spanish law provides for strong consumer protection and mortgage transparency. Your chosen lawyer would handle the mortgage procedure for you e.g. speak on your behalf to Spanish banks, negotiate the best interest rate, advise on how much you can borrow, help you to complete your mortgage application form
Spanish banks are currently offering low interest rates
Long-term endowment mortgages are becoming much more frequent
Repayment periods can range from five to twenty years, and occasionally more.
It is normal to lend up to 70% of the value of the property you are purchasing.
Spain has the most advantageous mortgages in Europe. Some countries have lower interest rates, however the base reference they use is higher than the Spanish
** Be aware that when you buy a property in Spain although you will know the price of the property in Euros you will not know the actual cost until you buy all of the currency to pay for it.
If the Euro strengthens the property could cost you more than you had planned.
If Sterling strengthens your property could become cheaper.
Sterling has been known to fluctuate more than 10% against the Euro, so this is an important factor to consider.
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Mortgage Documentation
Photocopy of your income tax returns
Three months salary slips
A bank reference
A break down of assets and liabilities
Last three months bank statements
If you are married and your spouse has proof of income it should be included.
Spanish banks like both names on the title deed.
A reference letter from your employer confirming date of employment and proof of income is not essential but it is helpful.
Copy of passport
If self employed, a certified statement of accounts.
Bringing this documentation to Spain can speed up any application and increase your chances of successfully securing a mortgage.
For more information on mortgages see our special mortgages section !
You will also need in relation to a specific property:
The "Nota Simple" from the property registry
An offer letter or sales purchase contract
An NIE number, Spanish identity number (required to obtain a mortgage)
A Spanish bank account
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Bank Valuations
The bank requires an official valuation on the property to ensure that their loan to you is safe.
You will need to pay the bank for the valuation work, this is usually between 300-500 Euros.
Note:- It is usual for the bank valuers to be licensed architects, so even if you don't need a mortgage, but have doubts about the structural integrity of a property hiring an independent valuer can be a good option
The valuer will compile a detailed report for the bank detailing the quality of construction and material used, the situation, state of repair, etc of the property and, most important of all, its market price which takes all of the above into account.
It is on the basis of the valuers report that the bank will set the level of mortgage available to you
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Annual Taxes:
Once you have purchased your new property in Spain, you need to be aware that for the majority of Spain there are 4 different Taxes that will be due at various times throughout the year:
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Municipal Taxes :
Expenses which must be paid to the town hall for rubbish removal (basura). The amount varies from town to town and is normally paid between March and April each year. The monthly cost is usually between 30-90 Euros.
Local Authority Rates (IBI) – based on the rateable value of your property which is determined by the Rates Office. The amount charged is approximately 0.5% and 0.7% of the rateable value. It is an annual tax normally payable in August/September every year.
NB: It is your responsibility to pay the municipal tax and Local Authority Rates even if you do not receive a bill.
Wealth Tax – is tax payable on your wealth in Spain (property, funds in bank account earning interest etc). The value used to determine the tax payable is the rateable value or the amount declared in the title deeds. The tax charged is 0.2% of this amount and can be paid at any time in the year, always in arrears.
Non-Residents Tax – a tax based on a rateable value of the property. For the ‘own use’ of your villa you would pay 1.1% of the rateable value x 25%. When your villa is let out for part of the year you would pay 25% of the gross rental income and where ‘own use’ occurs in the remaining months you would pay1.1% of rateable value x number of months not let out x 25%.
Amigo Properties can help you through all these procedures by putting you in contact with professional lawyers and tax specialists.
Call +34 952 66 38 16, fax +34 952 66 37 03 or email info@amigoproperties.com for further information and assistance.
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