Buying a property in Spain is the dream of many people who are looking for a great place to live in a sunny location. In order to make a dream like this come true, however, it is necessary to do some research so that you can find the best property at the lowest price. If you want to purchase property in Spain in an easy and hassle free way, then take a look at the 10 points below and apply them when you begin your search for Spanish property.
1. How much money do you wish to spend?
The first question is where is your money coming from? Is it tucked away in the bank or the building society, a second mortgage on your home in the UK or will you get it from the sale of your present home? You need to know that it is in place and ready to use before you make any decisions. If you are considering a mortgage in Spain then you need to have all the evidence necessary to show the bank how you will repay the mortgage as well as telling your Estate agent so that they can direct you to properties that are mortgage-able. Your budget depends on what you have raised in your own country or the amount that you currently have available to put down as a deposit for the mortgage.
2. Mortgages in Spain
They are much more expensive to set up but the interest rate is generally much lower than other European countries so you win in the long-term. Non Spanish Nationals usually receive 70% to 80% of the bank valuation of the property, remember, this is not necessarily the selling price. This means that you have to find at least 20% to 30% of the price of the property plus the costs of the mortgage: approximately 350 euros for the bank valuation, 1% of the mortgage value for the arrangement fee, 0.3% notary fees for the mortgage and 0.3% land registry for the mortgage.
3. Costs for Property Purchase
Generally you should allow between 10 and 12% of the purchase price to cover the costs of the actual purchase. Here is how this amount breaks down:
Lawyer – the usual charge is 1% of the purchase price of the property to cover conveyancing, searches and the visit to the notary to complete the purchase. Lawyers will often offer other services such as obtaining NIE numbers, changing utility services to your name, opening bank accounts etc. Take care though, you do not have to use a lawyer for the extra services and can often find these at less cost elsewhere. Always ask for an itemised quote before you agree to them doing this extra work and check with your estate agent for prices from other suppliers.
Taxes – Transfer taxes for a resale or a newly built property are 7%. These are set by the government and non-negotiable.
Land Registry – All property transfers have to be registered and this will cost about 0.3% of the purchase price.
Notary – In order to be fully legal all contracts for completion of a sale have to be signed in the presence of a Notary. Costs to the Notary will be about 0.3% of the purchase price.
All these cost are in addition to the costs of the mortgage stated above.
4. What kind of a property do you want?
Start with two columns, “must have” and “would be nice”. The “must have” list will include the number of bedrooms, outside space and other things you need for your family including proximity to schools, shops or public transport. The “would be nice” list may include things like en-suite bathroom or extra bathroom, more terraces, garage. Jacuzzi, swimming pool, tennis courts etc. Are you prepared to renovate? If so, you would need to have two separate budgets – one to buy the house and one for the work. Alternatively, put your renovation and purchase budget together and buy something that needs little or no work. Make this a family discussion so that everyone has the opportunity to put something on the list and nothing is forgotten.
5. What do you want the property for?
If it is a holiday home you will probably want easy access and so will want the property within a reasonable distance of an international airport. If it is a permanent home then other considerations might be more important. If you are buying as an investment to let, you need to think about the kind of rental, i.e. Long term or holiday as again the area is important for your potential guests.
6. Where do you want the property to be?
Now that you have your budget and your list of essential requirements, this is the time to start your research. Your first step is to go on to online and begin searching. Although you can search by town it is much easier at this stage just to search by area and budget as this will give you an idea of what you will get for your money. You will see that the closer to the coast of the Costa del Sol, the more expensive the property whether it is a town or country house.
7. What legal requirements are necessary for foreigners?
The most important is an NIE number, this is a national identification number and is necessary for most things you will want to do in Spain but essential for buying a house.
If you are coming to live permanently in Spain you need to think about transport. Residents of Spain are legally obliged to drive a Spanish registered car with a Spanish driving licence.
Although you can import your car from the UK this can be expensive and a RHD car is not the best thing to have on Spanish roads, far better to sell your car in the UK and buy one in Spain.
If you are in receipt of a UK state pension you will be eligible for free health care in Spain if not you will need to have private health insurance if you are not paying into the system by working in Spain.
8. Taxes and Insurance?
There will be annual tax to pay on your property in Spain whether you live here permanently or have a holiday home. These charges are MUCH less than in the UK, as an example 50 to 250 euros PA is normal to cover refuse collection and other council provided services. If you live here permanently you are responsible for paying taxes on your world wide assets so you need to ensure that you are not paying in the UK as well. If you own property in Spain it is necessary to have a Spanish will. Although you are not subject to Spanish Inheritance law on who the inheritors are, it makes life easier for your descendants if you have a Spanish will.
9. What else is important?
Find an estate agent you can trust, that will offer more services than just selling you a house. Beware of advertisements offering you free or low-cost inspection trips, you could pay dearly for them in the end.
The Guardia Civil are currently investigating several estate agencies who have been selling illegal properties. They estimate that more than 2000 illegal houses have been built in the last three years. The title deeds show the plot only and the agencies are not informing clients so they may not find out for some time that they are living in an illegal house. Reputable agents provide checklists for their clients of questions to ask so that they can double check everything when viewing properties and when talking to lawyers.
10. Get Title Insurance
In order to have complete security when buying a property in Spain it is important to get, Title Insurance. This type of insurance protects the buyer against any losses arising out of title related defects for the total time that they own the property. Some examples of covered risks include: claims by third parties such as undisclosed heirs, unrecorded tax liens, errors and omissions in the public registry, alteration or loss of title documentation, fraud, forgery, and clerical or typographical errors affecting ones title, thus affecting their investment or holiday home.
Title Insurance can enable you to purchase a property for a permanent home, holiday home or investment with absolute peace of mind. 1Casa are finalising a policy to help out the many people caught out in Marbella, this will help them to achieve legal Status and give them peace of mind too...
If you use the above 10 points when buying property in Spain, you will be well on your way to realizing your dream of owning a home in Europe’s sunniest location.