Eden Villas Spain

Home Buying guide

Buying a house is one of the biggest financial decisions that you will make in your life and it is important to have a good understanding of the process. But luckily there is a lot of good advice around helping you to make your home-buying an easy and problem-free experience.

The following information is a general guide to buying a property in Spain. It is not intended to replace professional advice, but highlights the main points you will encounter in a property sale.

Your lawyer

We strongly recommend a specialist conveyancing lawyer. Many Spanish lawyers speak excellent English and other languages and they are accustomed to dealing with foreign residents and their special problems, including property purchases.

Most people hire a lawyer or solicitor to undertake the legal side of buying their home. It is possible to do the conveyancing yourself, but this is a time consuming task and also risky if you lack the necessary expertise.

You are free to appoint an independent lawyer of your choice, or if you prefer we can recommend one.

Buying a property

Once you have decided on the property you wish to purchase and terms and conditions have been negotiated with the seller, your lawyer will carry out all necessary searches on the property e.g. to ensure the property is owned by the seller, that it has planning permission, that there are no outstanding debts or charges on the property and that there are no legal hindrances.

Once the searches on the property are satisfactorily completed by your lawyer and your offer has been accepted by the seller, the next step is to make a private contract between both parties and to put down a deposit (normally around 3,000€ initially) as a small reservation deposit to secure your purchase of the property. After 2- 3 weeks the buyer will be required to pay a further deposit to complete 10% of the purchase price.

These deposits take the property off the market and hold it while the buyer gets the remaining 90% of the purchase price, either from his own resources or by obtaining a mortgage.

If you, as the buyer, do not complete the sale on the stipulated date for the signing of the Title Deeds and you thus effectively break the private contract, you will lose your deposits. And if a seller accepts a higher offer in the meantime, and does not complete the sale, the seller will have to return you twice the amount of the down payments you gave.

When the two parties are ready to complete the sale, they go to the Spanish Notary and sign the sales contract at this office. The Notario is a solicitor appointed by the Spanish government to witness the signing of all legal public documents, in this case of the Title Deeds (Escritura). He represents both the buyer and the seller, and he is the one who formalizes and completes the sale making sure both parties agree with the transaction, checks that those selling the property are the legal owners with the right to sell, that all documentation is in order, and that the house does not have any unpaid debts.

Once the sales contract is signed at the Notary, the contract is taken immediately to the Property Registry office, where it is converted into the famous Escritura (the Title Deeds). The contract is called an Escritura de Compraventa (purchase contract), and the Title Deeds is called Escritura Pública, because it is a registered document of public record. Both are exactly the same document, before and after its registration. The original deeds is then kept at the Notary office. You will be given the keys of your new Spanish house at the Notary, once the Title Deeds have been signed (completion day).

Taxes

All property transactions in Spain are subject to either VAT (known in Spain as IVA) for newly built homes or Transfer Tax (known in Spain as ITP) for resale properties.

The Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP) is10% of the price of the purchase of resale homes. This tax must be paid within 30 days of signing the Title Deed.

The VAT tax (Impuesto sobre Valor Añadido – IVA) is 10% for newly built properties.

Also there are fees for Notary, Land Registry and accountant fees. We recommend that you allow a sum of around 12% of the price of the property to cover all purchase related taxes and costs. So please be advised that 12% must be added to any price advertised in resale properties within Spain. The estate agent´s commission is always paid by the vendor.

In addition to utilities bills, home owners in Spain are liable for an annual property tax known as IBI paid on all property to the Town Hall.

Capital gain tax

A capital gain tax is a tax charged to home owners for the profit made on and at the time of the sale of their property. This tax is not for buyers.

This tax is 18% of the profit the sellers make when they sell their Spanish property, no matter if they are residents or non-resident citizens.

There are some special situations in which a property seller is not liable for capital gains tax. These are the exemptions:

• Residents 65 years old and over, who have lived in the property for 3 years or more.
• Residents who reinvest the money from the sale of their old house to buy a new one and have lived in the latter property for 3 years or more.
• Long-term owners who bought the house before December 31, 1986.

NIE number

A NIE number is a national identity document for foreigners, which registers you with the Spanish tax authorities. It is essential to have a NIE number for any financial dealings you may have in Spain. All computer programs are designed for it and you will need it for any official or banking transaction.

Bank accounts in Spain

If you want to open a bank account in Spain you will have to give proof of your status whether you are a resident or a non-resident.

If you are a resident, you only have to go to the bank of your choice and show your resident ID to open a bank account, get money in Euros or in a foreign currency.

If you are non-resident (if you don´t have an NIE number and you come from another country, you are considered a non-resident) the bank will ask you as identification for your passport of your country of origin or in some cases they might ask you just for the ID number of your passport.

Mortgages in Spain

Whether you are a resident or a non-resident, you can qualify for a Spanish mortgage to purchase your home in Spain. Interest rates in Spain vary, but are generally much lower than in most European countries, since competition between Spanish banks is fierce.

Applying for a mortgage in Spain is a straight forward process and one can be obtained if you can prove your income will cover the repayments.

Generally two levels of mortgages are offered, one for residents and one for non-residents.

Most Spanish banks currently offer mortgages of 60- 80% of the declared value of the property over 5, 10, 15 or 20 years depending on whether you are resident here or not.

Spanish banks have English speaking staff who will be delighted to provide you with details of their products. Once you are going to apply for a mortgage you will need to open an account with the bank of your choice. They will accept faxed supporting documents prior to completion of your mortgage.

Usually the documents you will need to supply are:

• Last payslips over three months with last P60.
• Pension or benefits counted as income with three bank statements.
• If self-employed, last two years accounts. If only self-employed for one year, previous year P60.