What you need to know about the Buying Process
When you buy a property in Spain, like all countries there are taxes to pay and various fees. Javea Home Finders recommend that you budget between 13-15% on top your purchase price to cover all the necessary taxes and fees.
The largest cost is purchase tax to the government which is 10%. This is paid on completion when the deeds are signed at the notary.
We recommend you have a Lawyer or Gestor working for you to carrying out the conveyancing for the purchase of a property. Their cost will usually be around 1500 euros. Some work on a flat fee and others work on a percentage of the purchase price. There a lot of professionals offering this service, and some are more diligent than others, service and prices can vary. Javea Home Finders can recommend a selection of professionals that you can choose from, who we know have a good reputation.
There are also the notary costs which range between 0.5 to 1% of the purchase price and the land registry fees are approximately 1%.
There are other fees to consider like a mortgage arrangement fees (if applicable). Or perhaps you can´t be here to sign and grant your lawyer power of attorney, there will be a small fee for the notary to approve this.
Overall it is best to be in the assumption that you need to budget at least 13% and to ensure there are no surprises budget 15% to cover any fees and taxes.
When you decide to buy a property in Spain the most important part is how much you can afford to spend. If you take in to account the top end budget for taxes and fees of 15% of the purchase price this is quite a considerable amount off of what perhaps you thought you could spend. Reducing a 300k budget to 260k.
This can be really disappointing when you´ve probably been looking for many years on the internet and dreaming of your perfect villa only to find your calculations are out. At Javea Home Finders we work with you on your budget, you may be surprised at what you can purchase if you look a little out of town for instance.
If you need a mortgage than we recommend you speak to a mortgage advisor before you decide on your budget.
Overall your budget is key to what type of property you can buy in Spain and where it is located. At Javea Home Finders we have properties in the Northern Costa Blanca from as little 100K euros up to multi million euro properties. Whatever your budget we can help you find your dream home.
A lot of people require a mortgage to buy a property and if you have the correct criteria to satisfy a mortgage lender then as a British or other international resident you will be granted a mortgage.
The mortgage is based around your earnings and what you can afford to pay. As a rule the lender will work on the monthly repayment is 30% of your expendable income. Say you take home 3K your out goings in the UK are 1K you are left with 2K expendable income a 3rd being around 700 – This is the amount you can afford to pay every month as a repayment. The loan amount will reflect this.
In the current market non-residents of Spain are allowed to borrow 70% of the purchase value. This does not include any taxes or fees. It is the purchase price agreed on the property.
If you wanted a mortgage on a 300K property you would need a deposit of 90K plus taxes of fees of around 40K totalling 130K.
Javea Home Finders work with a reputable mortgage advisor and can help you secure a mortgage on your dream property.
The NIE number is a Foreigners Identification Number, there are several offices around the area where the NIE can be obtained. The closet to Javea is in Denia, you need to make an appointment and then return with all the relevant documents, pay a small fee and you get an NIE. You can do this yourself, although the staff usually don´t speak English or you can get a Gestor to do it for you for a small charge.
You need this NIE number for many procedures, including opening a bank account (resident or non-resident), buying a car, even, on occasions, accepting a package through the postal system. The actual N.I.E. number, when produced from a National Police Station or Specific Foreigners Office in Spain is printed out on a piece of paper, along with a stamp and signature provided by the National Police and this sheet of paper is often used as a form of identity. Once you have been issued an N.I.E. number, it is yours for life, although this paper certificate is only valid for three months from the date of issue.
Although largely ignored by the vast majority of foreigners up until the year 2005, the National Tax Identification number of Spain has been a requirement for all individuals conducting any type of business within Spain that involves purchasing or selling any items. The Spanish government have linked the N.I.E. number to various other departments such as the Social Security and residence (e.g. including the N.I.E. number on the tarjeta de residencia - residence card).
Whilst it is possible to obtain an N.I.E. number via the Spanish Embassy, or using Power of Attorney, the simplest way to do it in person when you are in Spain. This normally involves queuing outside the Police Station or Foreigner Office to submit your application having filled in the form and having your passports and photographs ready. You will be told the number there and then, but you would have to go back at a later date to collect the certificate. It is also necessary to register the number with the tax office and the fee must be paid over the counter at a bank to obtain proof of payment.
You can do this yourself or you can ask a Gestor to make the trip with all the relevant forms for you, but you will still have to go in person to pick up the final certificate.
Opening a bank account is an essential step to enable to reside or spend a period time in Spain, so you are able transfer money for your purchases and to pay ongoing bills such as mortgage, rates and utilities. It is a simple process similar to any other European country.
If you are planning to buy a property in Spain, or planning to live for six months or longer in Spain you will need to open an account with a Spanish bank.
You will need the following documents to be able to open an account.
• Proof of Identity - must be photographic, a passport is the best option.
• NIE number - Find out what an NIE number is and how to get them here
• Proof of address - this can be a utility bill which has been issued within the last 3 months.
Spanish banks are as sophisticated as UK banks and offer many services via the ATM machine network and the internet banking software they provide. Which means you don’t often need to go in to a branch. But it is a consideration when choosing a bank that they have a branch in your town of residence.
Javea has several large well-known banks all offering similar yet slightly different services. There are bank fees in some instances, but most banks offer free banking with the condition you pay a set amount in to the bank every month. It’s worth shopping around as the set fee varies and if you are not going to be able to pay in a monthly figure then the charges can be quite expensive and may vary between banks.
Here are some of the national banks that are in Javea, they all have websites in English where you can look at their services.
Sabadell – Offices in the Arenal, Port and Old Town
BBVA - Offices in the Arenal, Port and Old Town
La Caixa – Offices in the Arenal and Port
Bankia – Office in the Old Town
Santander – Office in the Old Town
Bankinter – Office in the Arenal
When you have found your dream home you need to make a reservation payment. Unlike the UK, you need to put a holding deposit down on a house that you want to buy. The Vendor will then take the property from the market and stop all marketing and viewings.
The reservation amount depends on the value of the house and can be between 3% - 10% of the purchase price, this amount will be negotiated when your offer on a specific property is accepted.
If you require mortgage approval, you also need to negotiate that this is a clause in the reservation contract. Some owners may not agree to this clause but most will.
The reservation is usually paid to the estate agent to hold until your lawyer/gestor makes the preliminary checks on the property, ensure the deeds are correct and there are no outstanding debts on the property and if you need a mortgage, the bank will send a valuer to the property to ensure it is worth what you are paying for it.
The reservation contract lays out the timescales to complete checks, attain mortgage approval, pay the further 10% deposit and complete the purchase.
When your lawyer has completed the checks and the bank, if applicable, has approved the mortgage in writing, then a further 10% deposit is paid (less the reservation deposit amount). Although with a new build property this could be 30-40% of the purchase price, depending on the terms agreed with the builder. A purchase contract is then drawn up.
A Purchase Contract follows on from the reservation contract. It is more detailed contract that states the terms of sale.
At the point of signing the Purchase Contract- a 10% deposit of the purchase price is paid on re-sale properties and usually around 30% on new build properties, depending on the terms layout by the builder or promoter.
The Purchase Contract will cover all areas of the sale, including what the vendor is responsible to provide. Some property is sold as seen, others you may have negotiated certain commitments from the vendor.
It will also state what bills are outstanding, including water, electric, IBI, community fees etc. that would have been incurred during the purchase process. Yours and the Vendors lawyer will agree who will pay what and a breakdown of the costs will be included in the Purchase Contract.
There may also be the purchase of furniture involved in the sale and an inventory of which is included in this document.
The document also lays out the completion date for the sale at the Notary. If for any reason you do not complete on this date and without prior written agreement to a change of date -you will lose your 10% deposit.
Gestors do not exist in the UK system. They are a big part of the Spanish administration system, especially for Ex-Pats, but the Spanish use them too. The term Gestor directly translates to Manager and basically that is what a Gestor does- they manage your affairs.
A Gestor can arrange for your NIE, Residencia and Padron, helping you through the process that at times can be time consuming and frustrating when you don’t know the system or cannot speak the language.
They can re-register a car, change your address with the traffic office and the townhall if needed. Ensure all your local taxes and bills are paid, including car tax and IBI (rates). Help obtaining a Spanish driving licence, change direct debits for bills and many other administration tasks that you would rather pay them to do, to save time and hassle.
Many Gestors will also carry out conveyancing work. You need to choose a conveyancer when purchasing a property, this can be a lawyer, but also Gestors carry out this work. It is worth shopping around and asking for recommendations of a good Gestor or Abogado lawyer that is thorough and priced correctly.
Abogados or Lawyers carry out many tasks similar to the UK. Anything to conveyancing to criminal trials. You need to choose an Abogado wisely as some will specialise in property law others in say, family law.
Hopefully you will never need an Abogado to assist you any further than in the purchase of a property but if you do, they are there to do anything from neighbour disputes, police arrests, marital break ups and much more.
When purchasing a property it is highly recommended that you employ an Abogado or a Gestor specialising in conveyancing. They will be your representative to work with the Vendors lawyer or representative to ensure that the property is fit for sale.
Over the years the purchase of property in Spain has become much more regulated but there are still some areas where you really need a lawyer to ensure the property and its parts are correctly registered with the townhall and is owned in full by the vendor- whether the property is legally registered, are any extensions included in the deeds, has planning permission been granted for extensions and in some instances pools.
It is important that the Vendor fully owns the house. For example, it could be a shared ownership or that the Vendor has inherited the house but not changed the documentation and/ or paid the inheritance tax. In some instances it can be a long drawn out process to purchase an inherited house that has not been registered to the current vendor.
As well as, if the property is correctly registered with the townhall, in very rare instances the town plan may be that a road is due to built in or through your intended property purchase. This is very rare but can happen, it also might be that the road is due to be widened and some of the land from the property may be taken to do this.
As well checking the property and its parts are in order, the lawyer will check any outstanding bills, this could be secured loans against the property, mortgages, IBI (rates), utility bills or anything else that is lodged against the property.
The majority of houses are fully registered and have no problems, but by employing a lawyer you can get peace of mind that your purchase will go smoothly.
In the UK there is not really an entity of a Notary when purchasing a property, you sign the contract, pay the money, get your keys and pay the land registry a fee to put the deeds in your name. In Spain you cannot register a property with the land registry without the deeds being witnessed and signed by the Notary.
Notaries are highly regarded in Spain and most have worked many years in the system before becoming a Notary. It is a very prestigious occupation and their fees reflect this. They are a professional in the Spanish legal system that will oversee the signing of contracts and agreements by personal or professional parties. Although they are a commercial entity and earn their fees from private individuals and companies, they are essentially a public figure, who draft, oversee, sign and witness in an impartial role.
Along with property purchases, Notaries will be involved in other legal contracts. If you are unable to attend to sign a contract, you can give power of attorney, this is witnessed and signed by the notary. If you own property in Spain you will want to make a Spanish will, again this will need to be witnessed and signed by the Notary.