How to buy a property in Spain: outright and on a mortgage

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The Spanish property market is on the rise. According to TINSA , in 2018, residential property prices grew by 6.49%, to €1,493/m². However, the house price index has not yet reached the pre-crisis peak levels. The purchase of a house or an apartment in Spain will become a profitable investment vehicle for investors to put their funds in and a worthwhile acquisition for those who want to relocate abroad.

The buyer’s expenses

Buying expenses exceed 12% of the property price:

  • The VAT rate amounts to 10% when buying a newly-built property and ranges from 8% to 10% depending on the autonomous community when purchasing an existing one. On commercial property a 21% VAT is levied.
  • The stamp duty is 1–1.5% depending on the region of purchase.
  • The legal fee amounts to 1% of the property price, as a rule. The lawyer will assist in collecting the documents and be able to act in the name of the buyer under a power of attorney.
  • The notary fee is usually about €1,000. The exact amount depends on the complexity of work and the property value.
  • The buyer pays about €750 to the Land Registry.

When taking out a mortgage, the buyer pays €250-450 to the bank for assessing the property.

4 steps to the purchase

Step 1 — choosing a property. The first thing the buyer needs to do is to decide on the property type, budget, the region of purchase and after that start choosing suitable options from the catalogue.

Step 2 — preparing the essentials. To arrange official procedures of any kind in Spain, a NIE (foreign tax identification) number, bank account or legal assistance is required. Please be aware that issuing a NIE number can take several days or weeks.

Step 3 — Making an offer to purchase and reserving the property. Show the property you like to the lawyer to check it. If there are no legal issues associated with the apartment, make the seller an official offer to purchase.

At this stage the parties sign the sales agreement, and the buyer pays a deposit amounting to 10% of the total value.

Step 4 — finalising the purchase. The notary certifies the documents and verifies that the parties have fulfilled all the transaction terms, including the payment for the property. After that, the transaction is registered with the Land Registry, the buyer receives the keys and moves into the new apartment.

Documents required for the purchase:

To buy a property in Spain, it is necessary to have a NIE number and a power of attorney if the lawyer is going to close the transaction in the buyer’s absence.

The buyer can obtain a foreign tax identification number personally while in Spain or at a consulate. In the first case, the buyer will need to submit: an application form, passport, sales agreement or other documentary proof of the NIE number requirement, non-EU nationals will also have to submit proof of legal entry to the country.

Mortgage arrangement

Foreign nationals can easily take out a mortgage, but certain terms for non-residents differ from those available to Spanish citizens. For instance, a Spanish national can borrow up to 80% of the property value from a bank. A foreign national can borrow 60–70%. Therefore, you should familiarise yourself with all the nuances of getting a mortgage.

Types of rates.

Most mortgage loans are issued at a variable rate. It means that the repayment amount changes depending on the ECB base rate. When the rate declines, the borrowers pay less and vice versa. The average variable mortgage rate is 1.7–2% per annum.

The fixed rate is usually higher, starting from 2.2%, but the buyer is protected from the bank rate increases.

Documents required for a mortgage loan:

To apply for a loan, the buyer needs to submit the following documents to the bank:

  • passport;
  • NIE;
  • preliminary sales contract copy;
  • tax return for the previous 12 months;
  • statement of account surplus with a bank in the applicant’s home country;
  • extract from a credit bureau.

The documents must be translated into Spanish and notarised.

The bank will review the application and give a response in 2–5 weeks. After the mortgage is approved, the borrower closes the transaction with the seller and becomes the owner of the apartment.

When buying a property on a mortgage, the buyer will face extra expenses. The mortgage arrangement fee equals to 1% of the loan amount. Property assessment costs up to €450. Insurance costs 0.2% of the property price per annum.

Highlights

  1. The maximum LTV ratio for Spanish non-residents is 70%.
  2. The fixed mortgage rate starts from 2.2% per annum, the variable rate — from 1.7%.
  3. The Maximum loan term is 30 years. The lendee’s age at the end of the mortgage term must be below 65.
  4. The loan payment must not exceed 35% of the average monthly income.
  5. When taking out a mortgage, the buyer will face extra expenses.

 

 

Disclaimer: This content does not necessarily represent the views of IWB.

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