This guide to buying property in Spain is intended as an overview of some of the resources and items to take into account if you are planning to resettle and purchase a home in Spain. Buying a house in another country, while exciting, can also seem overwhelming. These are some tips to help walk you through the process of buying property in Spain— remember, there are many resources available and there are steps you can take to simplify the process.
Marbella is an ideal location for buying property in Spain
The first area of consideration is what part of the country you’d like to call your new Spanish home. There are many wonderful areas of Spain ranging from coastal to mountainous, tropical microclimates to forested rainbasins. Of course, at Greenlife, we are very partial to the Costa del Sol. With over 320 sundrenched days a year, ample shopping, dining and golf, and quick international access through the Malaga airport, cosmopolitan Marbella is an ideal location for buying property in Spain. Narrowing down your geographical area of interest will help you to more successfully find the property of your dreams and will make understanding the legal considerations easier as well.
Get a solicitor when you begin your house hunt
Getting a local lawyer in Spain who understands property law and speaks English will make buying property in Spain easier and far less stressful than if you go it alone. There are many lawyers specialised in working with foreign buyers to get set up in Spain, aiding with paperwork and contracts, and generally making sure everything goes smoothly. Do yourself a favour, contact one of the many legal professionals in the area and you’ll be able to rest easy. They will walk you through every step along the way. Your estate agent can recommend a solicitor.
Out with the old? In with the new?
In addition to determining your budget for a buying property in Spain, you’ll want to determine if you want an older home or a brand new one. Older properties are often in village centres and are oozing with old-world Spanish charm. However, if you are looking to minimise unexpected repairs and expenses, a new home is frequently more hassle-free. In addition, newer homes tend to have layouts and amenities more in accordance with our modern expectations: open kitchens and floor plans, large windows to let the light in, and ample closetspace. If you purchase a home that is in construction, you can often get a better deal and homeowner’s insurance tends to be lower on newer properties.
Take your time
It’s important to explore a variety of property types and homes before you commit to buying your dream property in Spain. Do not let anyone pressure you, and remember that you’ll be in this house for years: you want to get it right. We recommend carrying a checklist of questions for the estate agent or seller, so that you don’t forget any important details. You may have questions that aren’t on that list. What’s important to you personally? Be sure to ask. Your solicitor will also know the important questions.
Show me your papers: getting an Spanish NIE
If you are not Spanish and will be buying property in Spain, you should apply for a NIE (Número de Indentidad de Extranjero) or Identification Number for Foreigners before you settle on a home. NIE applications are submitted in person to the police. If you need help with this, your local spanish lawyer can assist, but it is a process that most people can manage themselves with a little Spanish under their belts and and the proper supporting documents.
Mortgages in Spain
The first step is to determine if you’ll be getting a mortgage from your home country or from a Spanish bank. Contact with your local bank to see what they can offer. If you chose to get a mortgage in Spain, know that mortgages for non-residents in Spain usually have a maximum of 60-70% of the sale price or home appraisal valuation if that amount is lower. This 60-70% also applies to the purchase of land when you plan to build your own home in Spain. There are also special mortgages for retirees, in which you can have the mortgage in your name but also name a guarantor that is a family member, and this can minimise inheritance tax issues if that appointee is also part owner of the property you are purchasing. Most Spanish lenders use the Euribor rate plus a percent margin. This percent margin is where you should shop around for the best deal. Generally, securing a mortgage in Spain requires you to purchase life and home insurance from the lender as well.
Because securing a Spanish mortgage can take up to two months, you may want to start shopping for a mortgage before you have chosen the exact property to buy in Spain. This way, you’ll already have lined up all the information the mortgage lender requires, and you will know what it is going to cost. When you’ve determined the home you wish to purchase, your broker will request a quote as well as assist with the application process. Once your application is approved, you’ll set up a bank account with the lender to cover the appraisal valuation costs, and if the property is valued at an amount that is correspondent with the purchase price and everything else is in order, you can arrange your completion day to sign and start payments. The deeds will also be signed on completion day, and then the process will be complete.
Once you’ve decided on the Spanish property to buy, you or your legal representative will need to sign a Contrato de Arras– this is basically a reservation contract, in which you reserve the right to purchase the property within the next 30 days and freeze the price of said purchase by signing a contract and agreeing to pay an initial sum (generally between 3,000 and 12,000 Euro or 3% of the sale value). This contract should contain information about the future sale, identifying the exact home you wish to purchase, the price, how it will be paid and in what period of time, as well as when the title deed shall be signed over, and any details about the fees associated with the sale. Your solicitor can review all the conditions of the purchase reservation contract.
If the buyer does not follow through on purchase, they lose the payment they’ve made, and if the seller does not follow through, they must return to the potential buyer double the payment. These conditions must be specified in the document. All DNI (national identification number for Spanish citizens) and NIE for foreign buyers as well as full names should be clearly indicated in the contract.
Your solicitor or lawyer should review all contracts before signing. If travelling to Spain every time you need to have paperwork signed during the home buying process is not an option, you will want to assign a power of attorney in Spain so that they can represent you without you physically being present.
Private Purchase Contract
The next state is the Private Purchase Contract, or Exchange of Contracts. Now that the initial reservation contract is signed, there is an agreed period of time during which your local Spanish lawyer will check the Land Registry and perform searches on the title in order to confirm that the Spanish property you intent to purchase is legally owned by the party who is selling it to you as well as check that the property is free of any debts, liens, encumbrances or other charges. The Private Purchase Contract is drawn up and negotiated by your solicitor. The contract includes all the details of the purchase (from the description of the property itself, to the payment plan for full purchase, price of the home, and when the house will be yours– both completion date and possession dates). The payment deposit associated with a Private Purchase Contract is often about 10% of the agreed sale price of a pre-existing home. If the property is not built yet or not completed, the payment deposit will be higher and must be guaranteed by an insurer or a bank. For example, if you purchase a home that is still under construction, and it is not completed by the date specified in the contract, you have the right to reclaim the money paid, plus associated expenses.
The home stretch: title deeds and completion day
Formal completion of the property purchase when the Escritura Pública, or Title Deeds, are signed before a Spanish Notary by both parties and the remaining purchase price is paid in full. This marks the completion process. The Notary is a Spanish public legal figure who is a witness to the signing of the property title deeds. He or she makes sure that the relevant legal requirements and tax burdens have been met. You can learn more about Spanish Notaries on our blog. Although you can arrange it so that your Spanish solicitor represents you in signing the deeds, you will need to ratify the purchase with a Spanish notary or an authorised notary in your country, thus confirming you are the new owner with an original signature that will be filed with the Spanish Land Registry. The complete registration process of the title deeds takes several months from the time that the Spanish Land Registry receives all of the associated paperwork for inscription. However, as soon as your deeds are issued, the Registry will create a provisional inscription.
Taxes can be taxing. Be prepared
Your closing costs for buying property in Spain will generally be between 11 and 14 percent, and you’ll need to add a couple more percentage points to that number if you get a Spanish mortgage. This estimated figure includes notary costs, Transfer tax (ITP), legal fees and VAT. For more details Tax Information page on property buying in Spain.
Finally, if you maintain status as a non-resident, you’ll be responsible for paying annual tax in Spain based on the government rated value of your home. This tax is usually quite low, calculated at around 1% of the establish value of the home at a tax rate of 19%. For more details on the taxes post-completion, check the “Once the property is purchased” section of our Tax Information page. If you chose to let your Marbella home, you’ll be responsible for additional tax payments on a quarterly basis. A local gestor in Marbella, or tax manager, can help you with this.
Although buying property in Spain can seem daunting, sound property, legal and financial advice goes a long way. Connecting with a solicitor locally will help simplify the process. Happy home hunting!