Purchasing process from A to Z

Once you have found the right property, the purchase process begins with a reservation agreement, which takes the property off the market and “freezes” the purchase price.

The deposit to be paid at this stage is between 3,000 and 12,000 Euros. Before arriving in Spain, ensure you have funds available. The best way to pay the reservation fee is by credit card or transfer. It is not advisable to pay by cheque, especially if drawn on a foreign bank account, as it can take approximately 14 days to clear at a Spanish bank. Such a delay could cost you your property.

Exchange of private contracts within approximately 14 days of signing the reservation agreement, the private purchase contract is to be signed between the buyer and the seller (or their authorized representatives). During this time, the lawyer should have completed the investigations and searches in relation to the property and will have arranged with the seller the procedure for cancellation of any outstanding debts.

It is customary practice at this point to pay between 10 to 50 % of the purchase price. Funds can be lodged in your own Spanish bank account and your lawyer can arrange for an account to be opened for you or on your lawyer´s escrow account. Our lawyers have negotiated some competitive rates with local Spanish banks for their clients.

A property sale is formally completed in Spain when the title deed is signed before a Public Notary in Spain, the agreed final payment is made, and possession of the property is passed to the new owner.

When purchasing a property on a new development, the developer should provide bank guarantees against each payment made on the account of the purchase price. Many developers offer these bank guarantees free of charge whilst others make a percentage charge. A bank guarantee protects your payments.

There are in principle three fees and one tax to pay when purchasing property in Spain. You should budget that the costs involved purchasing a property in Spain are approximately 11-14% of the purchase price. If you have a mortgage there is an additional cost of approximately 2% of the property purchase price.

The legal fee depends on the service you require, plus VAT (IVA) currently charged at 21%. We have a transparent fee structure with clear advice of any charges and fees.

The notary charges according to a fixed scale, depending upon the official value of the property. The charges may range from 300 to 1200 Euros.

The transfer tax must be paid after completion. When buying from a developer, you will pay VAT (IVA) at 10% which is payable with each instalment, plus Stamp duty at 1,5 % of the property price. A VAT rate of 21% is applicable when buying commercial premises, plots of land or garage spaces.

Bear in mind Annual Property Costs.

1. Community fees
2. Local Real Estate Tax (IBI)
3. Annual Income Tax (non-resident tax)
4. Utility Services

Spanish banks are willing to give mortgages to non-resident purchasers of property in Spain. The period of the mortgage depends upon the age of the buyer but can be extended up to a maximum of 30 years. The amount borrowed is 60 to 70% of the property’s value, depending upon your income and assets. You will need to provide proof of your capacity to repay the mortgage and most banks will look for earnings per month more than three times your expected monthly mortgage repayment.

Documents required by the Spanish bank to apply for a mortgage:

1. Last three pay slips
2. Last tax return
3. Banks reference to include telephone, fax number, name of manager and account numbers
4. Last three statements of your bank account
5. Statements of current assets and liabilities
6. If employed, a letter from your employer stating the length of employment, salary, etc. is required. If self-employed, profit and loss accounts signed by a Chartered Accountant are required.

It is advisable to use a lawyer based in Spain who will provide the legal guarantees for the purchase of the property, ensuring that Spanish legal requirements are met.