We live in the Granada area and know Alhama De Granada very well. The town itself is beautiful, a real slice of history with fantastic views, but also with modern facilities. The people are generally friendly and helpful and, because Alhama is a bit like an island in some ways - set all by itself in the mountains, you should be able to find everything you possibly need there in the way of provisions, shops, stores, an excellent health centre, etc. There is also a reasonable bus service into Granada, Velez Malaga to the South, and surrounding areas.
However, we live in a small village which is around 20 minutes drive away from Alhama itself, so our costs of living will be different.
Properties in Alhama De Granada and the surrounding countryside are still a little on the pricey side, especially considering the downturn of the property market. However, it would definitely pay you to haggle over price. You may or may not be lucky, but it is certainly worth a try!
As to your health requirements.
If you have up to date national insurance payments in the UK, you could consider applying for an S1 form. This would give you access to state health care.
However, this would only be short term, as I think the most you will be covered this way is for 2 years, and sometimes less, depending on your last contributions.
Either way, as you are in your 30s-40s, you would not be able to get free state health care on a permanent basis unless you were paying into the system.
Some regions of Andalucia did, until recently, have a system whereby you pay a small amount per month, and for this gain access to the local state healthcare services. However, any costs on top of this, including visiting a consultant, xrays, scans, etc, plus prescriptions, you would have to pay for at the full rate.
I also think that this scheme is no longer in existence since the changes in healthcare laws as of April this year, but may be worth checking out.
But to be honest, your best bet would have to be to take out private health care insurance to cover your needs and (see below) you will need to do this before you set up home in Spain.
The costs of this vary according to insurance company (and you will need to find a company which provides a service in your area), but health cover in Spain, through a Spanish company, is usually cheaper than in the UK or via an English company.
But here comes the crunch.
As already noted, insurance companies will either refuse to insure you for existing health conditions, or your premiums will be extremely high in accordance with these.
There is another way around this, but it is not cheap.
As ClaireT has said, you could set up as self employed - Autonomo.
Only one of you would need to do this, as the other could claim healthcare entitlement under their partners claim.
But this will cost a minimum of 260 euros per month, according to your situation, and this is for state health cover and future pension.
On top of this, you would have to make regular tax returns and pay tax on profits. Setting up as autonomo is really for those setting up a business, so tax returns and payments have to be made accordingly. You would also need to set up an invoice and payments system. You would definitely need an accountant or gestor to help you with this, so their fees would have to be taken into consideration too.
For any financial transactions in Spain, you will need an NIE and, as living permanently here, the Government of Spain will also expect you to sign on the Foreigners register and obtain a green card.
And in fact, you will find it increasingly difficult to do many things in spain without this Green card.
The main issue right now, however, is that, since April this year, laws on healthcare have changed, and with these, entitlement to a green card.
The new rules seem to be that you cannot get your green card without showing that you have access to health care (which will either be an S1 or a private insurance certificate) and that you can prove that you have enough to live on each month (and thus not become a burden on the hard pressed spanish State).
This will mean either showing a contract of employment or perhaps your business books. Savings only count if you can show that you have investments providing a regular income.
(Some posters here will state that all of this is against EU legislation, but that is debatable and either way, Spain is doing this so you have to comply if you want to live here with less hassles ).
And the crunch here is that many local councils are awaiting confirmation of rules before they issue green cards and this could take some time!
Sorry for the side trip into ongoing health and residence issues, but it is something you will have to deal with.
But another issue is your work online.
The internet service in Spain is not as good as you may have found it in the UK, especially in rural areas.
Where we live, we only have access to ADSL from Movistar (previously known as Telefonica) and it is very unreliable. WIMAX is unavailable to us and Satelite internet services are expensive and have strict rules about usage.
Any other ADSL service we used would have to work via lines set up by Movistar, so they are not much use to us.
However, this may not apply to Alhama De Granada or to Zafarraya.
Alhama is at the top of a mountain, rather than in a dip (as we are), so better signals may be available.
But you will need to check this out as you will be continuing your internet work here.
Sorry for the extremely long post (and even then, it didnt answer all of your questions!), but I hope that at least some of this helps.
And good luck in finding your new home!