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Real Estate specialist on the Costa Brava
The purchasing procedure
Purchasing a house in Spain!
What are the things you have to consider before buying a house in Spain?
Most of your common questions can often be answered right away. However, more detailed questions require a bit more research.
Below you find a well-organized piece of information about a lot of things you will have to cope with sooner or later if you have decided to buy a house in Spain.
The steps listed below provide you with more information on how the 'buying procedure' takes place. Furthermore it can help you to arrange appropriate prerequisitions before selling your house in Spain.
Index
» It provides orientation about:- reasons for purchase
- letting and selling through Club Villamar
- letting through Club Villamar
» Purchasing:
- registering at the 'registro' and 'catastro'
- legal owner
- the 'escritura' (deed of ownership)
- the 'nota simple' (extract)
- Signing the personal contract
» Transfer:
- the 'copia simple' (simple copy)
- the 'copia autorizada' (certified copy)
» Taxes:
- 'impuesto de transmisiones patrimoniales' (transfer tax)
- 'impuesto sobre bienes immeubles' (real estate tax)
- capital gains tax on sales
- 'impuesto sobre la renta de las personas fisicas' (income tax)
- 'tasas' (local tax)
» Power of attorney:
- Issuing a 'poder' (power of attorney)
» Financing and costs:
- financing - which way to choose?
- Spanish bank account
- Required documents for a mortgage enquiry in Spain
- Additional costs of buying
- Annual costs for non-residents
» Orientation | Back to index |
For many strangers Spain is still one the most popular places to go on holiday. No wonder that there are a lot of people who dream of buying a house in Spain either for letting or to settle down (not even permanently) in Spain.
Buying a house in a foreign country is nothing you do daily. It is possible that you will encounter situations that you are not used to in your own country. You will have to deal for example with differents laws, taxes, permits and also with a different 'mentality' than your own.
Taking all this into consideration you should not rush to place your signature at any contract of sale being offered to you. If you prepare well and profoundly together with chosing the right persons to care a lot of legal, financial and fiscal problems can be prevented.
Buying a house in a foreign country isn’t anything you would do daily. It is very important to putting straight your personal wishes and financial possibilities to be well-suited to each other. Not only should this be applicable for the day you buy your house but also for the years to come.
›Reasons for purchasing
Some often named reasons for purchasing a house in Spain are:
- investing (letting)
- tax reasons
- a (second) home to spend the holidays
- the weather
- a nice surrounding to spend the winter
- permanent residence to settle down in Spain
- starting an own business in Spain
›Renting and purchasing through Club Villamar Before you definetely decide to buy a house it is good to explore the surrounding well. We recommend to first rent a house in the area you like best. Club Villamar offers the possibility to rent via its own rental organisation. Visit our our website www.clubvillamar.com to check on the current offer and availability of our rentals.
Renting and purchasing via Club Villamar even can be financially very interesting. If you have rented through Club Villamar during the orientation period and you intend to purchase a house through Club Villamar Real Estate it is possible to get back the renting amount. Mail to info@clubvillamar.com to inform about the general terms and conditions.
›Letting through Club Villamar
You like to get additional profit from your holiday villa cover all costs like mortgages en maintenance and after all to earn some extra money. Maybe you have even tried to rent to a third party but you got the idea you could make more out of it. You do not really feel like attracting customers and manage the administration of your reservations. It is just like that you want to get the highest possible profit and therefore investing the fewest effort possible.
Of course you intend to enjoy your home by yourself and placing your own bookings. For you as a home-owner it is rather time-consuming to manage the letting activities of your villa all by yourself. Club Villamar likes to take on these activities and organises the complete letting and administration of your villa during letting period. For this reason you can be absolutely sure that your precious property in Spain is in reliable hands. For more information on letting of your villa through Club Villamar click on 'house-owners'.
»Purchasing | Back to index |
›Registration at the 'registro' and 'catastro'
If you are looking for a house it is the best to contact a local broker in the chosen area. If you do not speak any Spanish the most practical thing is to chose a broker with whom you can communicate in your 'own language' or in a third language both parties are good at. Once you have found the house of your dreams you can go over to the purchase procedure. However before you sign the contract of sale there are still some things that must be dealt with. After the physical part of the property transfer has taken place you will have to go through a number of procedures before you really shall be registered as the legal owner.
This legal registration comes into force after the notary has registrated at the 'registro de propiedad'. This authority takes care of the registration of real estate owners in Spain. Foreigners often confuse the 'registro' with the Spanish 'Centro de Gestion de Catastral' or in a word the 'catastro' (land registry office). The 'catastro' takes care of the specific registration features of the real estate, for example description, size, location, boundaries and legal characteristics.
›Legal owner
An important issue you have to face when purchasing a home is who (legally) owns the land the house is built on. According to Spanish legislation and ruling bodies the owner of the land also owns the premises (built objects like the house). Apart from this the land is used mainly as a pledge for mortgages and loans. When it comes to transactions of land and premises you must be sure that the land is unmortgaged and free of debt. Once you are the legal owner of the land you are the first person being liable for all mortgages or loans the land is charged with.
Firstly research must be done whether the person selling the house is the real and solely legal owner. Furthermore one has to make sure that there are no mortgages, loans or outstanding tax payments left the real estate is burdened with. The person selling the house must be able to produce an 'escritura' (deed of ownership) . It is handy to check the escritura carefully.
If you do not speak any Spanish we recommend to have the 'escritura' checked by an expert advisor (e.g. your lawyer, notary or accountant). Most of the times he will ask for a 'nota simple' for the real estate at the 'catastro' or the 'registro'. This document states the owner’s name, address, place of residence and the registration number of the real estate as it has been entered at the 'registro'. It all sounds very complex but most of the times the notary you have called in for the conveyance will investigate and inform you on all of these difficult aspects that belong to the purchase. However, remain critical to all parties and check carefully on the work of the people who are involved in the purchasing procedure!
›The 'escritura'
In legal terms the Spanish 'escritura' is equivalent to a notarial deed. Spain has different kinds of 'escrituras'. Some examples are: 'escritura de poder' (see power of attorney), 'escritura de obra-nueva' (deed for new buildings) 'escritura de division horizontal' (classification of horizontal real estate, e.g. apartments) and finally the 'escritura publica de compraventa' (notarial deed of purchase and sale)
The 'escritura publica de compraventa' or the notarial deed of ownership is usually called the 'escritura' in Spain.
›The 'nota simple'
In the 'nota simple' it is exactly stated how the real estate is registered. All specific details about the real estate are indicated, too. For example: plot boundaries, current owner or possible joint owners, outstanding mortgages, the debts and attachments the land is burdened with. Furthermore it is indicated whether the 'plusvalia' (upward value adjustment taxes for developed land) and the property transfer tax is paid.
Additionally it is good advice to inform at the town hall about the allocation plan of the close neighbourhood. It is possible that there are plans to built holiday homes, restaurants or discotheques and so on right in your neighbourhood.
›Signing the private contract
Before the real purchase deed is signed in the presence of a notary the buyer usually signs a 'contra privado de compraventa' (private contract) with the seller or his broker first. You also have the possibility to sign a 'contra de opción de compra' (option contract). This option contract is not a legally binding contract of sale but it is necessary to make a deposit of 10% of the purchase money which you will lose if you do not buy within the agreed period of time.
»The conveyance | Back to index |
It is usual for all parties to be present when the deed is read aloud, signed and confirmed by he notary. If you cannot attend the conveyance physically it is possible for all parties to pass a power of attorney to somebody else.
›The 'copia simple'
By signing the 'escritura' en by registering at the 'registro de propiedad' you acquire the legal ownership. Signatories of the 'escritura' receive a 'copia simple' (simple copy) of the original document that can be used to sign the electricity, telephone, water etc. over to you. For electricity suppliers the 'copia simple' is often sufficient to prove that you are the owner.
›The 'copia autorizada'
A 'copia autorizada' (certified copy) is sent to the 'registro' to clear the final registration and the tax amount of 6% that are connected to the conveyance. After a couple of months the 'registro' will send you back the 'copia autorizada' provided with all necessary stamps. The original 'escritura' or the real title deed will be kept in the notary’s archive.
The difference between the acquisition price and the down payment has to be cleared by bank draft, cheque or by a payment instruction. After the money has been received to get a receipt and a 'copia simple' of the escritura. With this copy you can prove that you are the new owner of the real estate. You now receive the keys of the building.
»Taxes | Back to index |
The 'Impuesto de Transmisiones Patrimoniales' or ITP (Spanish property transfer tax) is 7%. For new buildings one does not have to pay property transfer taxes although one has to pay the Spanish VAT (IVA). Property transfer tax has to be paid for the value of the real estate as it is stated on the 'escritura' (real market value). Ther real estate tax is determined based on the value as it is stated in the escritura.
To pay less property transfer tax many buyers and sellers indicate a lower real estate value in the 'escritura' than the real commercial value. One part of the purchase money is stated in the escriture whilst the other half is paid unofficially. This lower value is accepted by the land register without any problems because this method has been adopted nationwide. We advice against this as the purchasing party sooner or later will have to deal with the capital gains tax again, too.
›Impuesto sobre bienes immeubles (real estate tax)
In Spain you have to pay 'impuesto sobre bienes immeubles' or IBI (community real estate tax). The basic rate of the IBI is 0,4% of the real estate’s indicated value at the land register.
You have to file the tax return of the IBI by yourself at the Spanish tax authorities.
›Capital gains tax in case of sale If you sell your Spanish house you have to pay taxes on your capital gains. If the seller of the real estate is a non-resident of Spain than the purchaser of the real estate is obliged to retain 5% of the purchase money as stated in the escritura and pay this amount to the Spanish tax authorities. Some payments can be deducted for example the IVA, the ITP, 75% of the 'plusvalia' (for explanation see 'nota simple'), the notarial charges and housing improvements (only with a 'declation de obra nueva'). This one is adapted continuosly. Please consider recent changes.
›Impuesto sobre la renta de las personas fisicas (income tax)
If you are a non-resident and you let your house than you are obliged to pay income tax in Spain for all earnings you make out of letting. Non-residents who own real estate in Spain but do not let are also obliged to pay the 'valor catastral' (income tax). You have to quote 2% of the value of your house to the Spanish income tax authorities as a kind of rateable value at a fixed price.
›Tasas (community tax)
Local tax are different in every community. This taxes are being raised for issuing licences, picking up waste, sewage and so on. The community is allowed to ask a contribution for services it performs on request of the residents (precios publicos). This can be the removal of bulky refuse, parking restrictions and cleaning private ways. Apart from this an additional tax can be imposed for the increase in value of the real estate by improving the infrastructure (contribuciones especiales).
»Power of attorney | Back to index |
When it comes to official actions you can be represented by someone else. This can be done by granting someone an authorization. The person who is authorized by you, however must be able to produce a proof that the authorization is valid. This prove is provided by a client's authorization. Spain has various kinds of authorizations:
'Poder general’ = general authorization (without limitations)
'Poder para administrar' = administrative authorization
'Poder arrendar' = authorization to let
'Poder cancelar' = authorization to cancel mortgages and guarantees
'Poder cobrar' = authorization to collect money on your behalf or to administrate your financial matters
An authorization must clearly contain the purpose and the duration of the authorization. If you grant someone a too generous authorization for instance, this person can take all sorts of actions on your behalf. In the end it is rather difficult to undo these actions (which are eventually signed in your name) because in the authorization no clear description of limitations has been taken down.
If it is necessary to grant someone an authorization to purchase real estate it is advisable to take down the purchase money (and cost of purchase) separately from the purpose and the duration. This to make sure that there will be not bungling on the agreed amount. Many foreigners use an authorization that can be issued by a notary for about € 80.
»Financing and costs | Back to index |
Financing foreign real estate is not always that easy. Usually there aren't a lot of national banks that are prepared to mortgage a house in a foreign country. First and foremost this has to do with the risk a bank takes to get the lent amount, interest and the costs connected to a possible compulsory auction (=public auction if the debtor cannot pay anymore) of the real estate back. It depends on your personal situation on how you wish to finance your real estate in Spain.
›Using own money (own assets) Although this is the most simple way it is not the way most people will be able to go neither is it the most advisable one. This way the own assets are being fixed within the real estate and are no more available for other purposes. To get a Spanish mortgage very often a certain amount of own assets is required as a Spanish bank almost never grants a complete mortgage.
›Continuous credit or personal loan
For this kind of loans banks often require an additional loan on security. Generally spoken such a loan is only lucrative if you wish a loan that doesn’t exceed an amount of about € 25,000.
›Second mortage for real estate in your own country
To finance Spanish real estate you can decide to use the surplus value of your current home to settle a second mortgage for your house in Spain.
›A Spanish mortgage for Spanish real estate In this way you connect a loan directly to the real estate you bought. The advantage of this is that your other possessions/properties remain unmortgaged although you buy new real estate.
Spanish banks however do not grant a 100 % mortgage based on the appraised value of the real estate to foreigners. In most of the cases the maximum financial resources are about 70% of the appraised value as it is determined by the bank. You will always need own money to deposit to cover all extra costs (purchaser's costs). The total amount of the purchaser's costs will be about 10-11% of the purchase price. If you are not able to pay the purchaser's costs and the 30% 'own money' they you may not be able to buy the house. To give you some more information on the necessery own money, the mortgage amount and the monthly mortgage payments click on 'mortgage calculator'. Based on the variable costs you fill in it will show the required numbers.
›Mortgage through a project developer
If you acquire a home through a project developer he most of the times offers certain forms of finance for your house. The disadvantage however is these forms of finance often are very expensive.
›Spanish account
If you are planning to purchase real estate in Spain we advise you to open a Spanish bank account as soon as possible. Perhaps you can already arrange that from your own country by ordering opening forms from a Spanish bank. To make things more simple and to speed them up a bit it is easier to pass by a Spanish bank by yourself to make all the arrangements.
After the Euro has been introducted non-residents can maintain a bank account at the same conditions like residents. However, there is a difference between the resident account and the non-resident account:
- residents (foreigners who have a residence permit) get a 'cuenta de residente'
- non-residents (foreigners without a residence permit but owning for example a second home in Spain) get a 'cuenta de no residente'
For most people who want to buy a house in Spain a mortgage (hipoteca) or loan is essential to finance the house. Until short the possibilities in Spain were limited due to non-lucrative Spanish mortgages including a short term of loan and high interest rates.
These days there are continuosly more interesting mortgage forms being offered on the market including terms of loans of 20, 25 and in some cases even 30 years. Even the interest rates have become far more lucrative and are parallel to the market rate of interest (euribor) in other European countries. Generally Spanish banks are approving of granting mortgages to foreigners.
›Required documents you need to apply for a mortgage in Spain
- The filled-in application form
- A copy of your ID (no driving licence)
- If you are employed: wage slips of the last three years
- If you are self-employed: annual returns of your company
- If you are self-employed and you don’t have your annual returns hand in an auditor’s report
- The original contract of sale, preliminary contract of sale or call option
- A copy of your taxable income statement + specification
- A copy of the deed of ownership (escritura)
- Your N.I.E. number (waiting period for applications about 4-5 weeks)
›Extra costs of purchase
Being the future purchaser of a (second) home in Spain it is crucial to know exactly what kind of costs will come with buying Spanish real estate. To give you an idea of all the additional costs we have specified these costs for you. For more detailed information about the Spanish tax authority click on 'taxes'.
- I.V.A. (VAT)
7% of the purchase price on new buildings
- I.T.P. (property transfer tax)
7.2 % of the purchase price on existing buildings
- A.J.D. (stamp duty)
1% of the purchase price on new buildings
- Notarial charges
About 0.6% up to 1% of the purchase price
- Bank charges
About 1% till 1.55% of the financed amount
- Registration fees
About 0.3% till 0.7% on the purchase price
- Connecting costs for electricity
For new buildings about € 200 (varies in every community)
- Connecting costs for water
For new buildings about € 180 (varies in every community)
›Non-resident’s annual costs
- 'cuota de comunidad'
Often described as 'service costs'. These costs include the maintenance and costs of community facilities e.g. parks, public swimmingpools, streetlamps, security and so on. This costs strongly depend on the number of habitants and the kind of community facilities. Generally though the costs are between a € 150 and € 1000 a year.
- 'patrimonio'
This is the welfare tax and depends on the purchase price of the object.
0.2% if the purchase price is lower or exactly € 110,000
0.3% if the purchase price is higher than € 110,000.
-'impuesto sobre bienes immeubles' (IBI)
Spanish real estate tax. It is about 0.4% till 0.8% of the taxable value of the 'valor catastral' (property)
-Waste water and collecting waste
This strongly depends on the community but is about € 60 a month
-electricity
Depends on how much you use
-fire insurance (building and goods)
Depends on the insurance company you settle the insurance but the costs for such an insurance start at about € 110.