Buying a house in Spain is, of course, different to buying in the UK. The legal process can seem daunting and maybe even a bit confusing as it is new to you. We here at Spanish Dream Property understand how it feels as we ourselves have been through the process and own our own dream property. This outline of procedures is a general guide and is in no way definitive and is not legal advice.
A few things to remember:
You must have legal representation for your purchase by an English speaking Spanish lawyer, Abogado. He is responsible for all legal checks on the property and ensures the conveyancing runs smoothly and there are no outstanding debts linked to the property. We can arrange for you to meet an independent lawyer during your viewing trip. It is important that the legal team you use are independent, not closely linked with the estate agent selling the property, as your legal team need to be working solely for you!
When deciding on your budget for your dream property remember to factor in the ‘extras’. The overall cost of buying a property in Spain is around 11-12% of the purchase price, which includes taxes, legal fees and searches. If you are buying a second home it will need kitting out in full before you can use it. Many re-sale properties are sold part furnished but you will still be looking to replace or buy a lot of smaller items, which can add up. A new property needs everything and furniture packs are the easiest way to turn an empty shell into your home, and we are happy to help with these also.
Within your budget allow for currency fluctuations between the date when you first plan to buy and the date when payments are due. Do your sums with caution to avoid being caught out, and if the fluctuation goes in your favour then you can treat yourself to something extra!
When deciding on your budget for your dream property remember to factor in the ‘extras’. The overall cost of buying a property in Spain is around 12-13% of the purchase price, which includes taxes, legal fees and searches. Many re-sale properties are sold part or fully furnished but you will still be looking to replace or buy a lot of smaller items, which can add up. A new property needs everything and furniture packs are the easiest way to turn an empty shell into your home, and we are happy to help with these also.
Within your budget allow for currency fluctuations between the date when you first plan to buy and the date when payments are due. Do your sums with caution to avoid being caught out, and if the fluctuation goes in your favour then you can treat yourself to something extra! Speak to us about setting up an account with a currency exchange company for the best exchange rates and advice on when to exchange currencies.
It is possible to finance the purchase from the UK through the sale or re-mortgage of your UK home, but equally, you may consider a Spanish mortgage. We can recommend fully independent mortgage advisers who will discuss your options with you before you travel and guide you through the application process. There are pros and cons to both, which is best is down to your individual situation. Spanish banks, just as UK banks, will require proof of income before agreeing to lend money. Generally, as long as you can prove you meet the loan income requirements, Spanish banks will agree to lend up to 60% of the property value, but this is at the bank’s discretion and dependent on your income. If you already have a mortgage agreed in principle it can speed up the buying process. We do not want you to pay a deposit on a property that you then cannot proceed to buy as you will lose your deposit.
Documentation required as proof of income for a Spanish mortgage will probably include your passport, proof of UK residency (such as driver’s licence or council tax bill), if in employment your 3 most recent wage slips if self-employed 2 years audited accounts and proof of payment for last 2 years’ tax returns, 6 months worth of bank statements showing declared income, proof of any other sources of income you wish to borrow against such as pension or rented out property. You will also need to give details of the value of any property owned and any outstanding mortgages, loans and credit cards. Plus, details of how you are raising the balance of the property purchase costs. This can all be discussed in advance of your visit in detail with the mortgage adviser. Before proceeding with a purchase you will need to obtain your fiscal identification number, NIE, for each person named on the deeds, Escrituras. You will also need to open a Spanish bank account. These can be done on your first viewing trip
When viewing properties:
At each property make notes. Write down the good and not so good points you notice about the property. Take a compass to see which way the terraces face; is it on mains water and electricity; note details such as how far from a communal pool, the shops, beach and local restaurants; are there any repairs needed; is furniture included and, if so, what items. Using your pre-defined priorities ‘score’ the property.
Re-visit the highest scoring properties a second time at a different time of day.
If the property is in a community ask how much the annual community fees are and what they cover, how many houses share the pool and what times is it available to use. Most communities do allow pets but double-check if having a pet is important to you.
If you intend to let the property as a holiday rental, then speak to us about the requirement for Tourist Licenses. Murcia and Alicante have different requirements! Not all properties can qualify for a license and there are some communities or areas where it is not possible to obtain a rental license at present. It is illegal to let a property as a holiday rental with out a license. If a property already has Tourist License it is transferable to the new owner.
Take a walk around the immediate area and talk to local residents.
Once you have chosen your dream property:
Now you must appoint your Abogado (legal representation). This is essential. Unless you are a fluent Spanish speaker and reader use a bilingual abogado that is independent of the estate agency selling the property and of the vendor. We can help you choose one.
Having already ascertained that you will be in a position to finance the purchase you now need to place a holding deposit. In Spain if you back out of the sale the vendor gets to keep this deposit, so be sure before you pay. The holding deposit is usually in the region 3000 euros and should be paid to your own abogado. (Please notify your bank/card supplier before you go to Spain that there may be a transaction in euros of this size during your stay otherwise they may block it.) Alternatively, if you already have a Spanish bank account you can transfer the funds in advance of your trip to finance the deposit payment. Remember that if you pull out of the purchase you do not have the deposit refunded. (If the vendor cancels your agreement then the deposit should be returned to you.)
When payment is made you will sign a Reservation/holding agreement which also acts as your receipt. Usually, there is an agreed date for any second payment and proposed date for completion when the balance is due. With an ‘off-plan’ property however, payments are usually staggered over the building process.
The signing of the Escritura is done in front of the Notary, a lawyer appointed by the Spanish government to ensure proceedings are legal and taxes are paid and to handle the change of ownership at the land registry. All payments, including taxes, must be made on completion.
Sometimes clients prefer to appoint a representative to sign the documentation on their behalf, usually your Abogado. This avoids the necessity for additional trips to Spain. To do this you must first attend the Notary office during an earlier visit and sign a legal document giving your Abogado power of attorney for the purpose of purchasing the property. Your abogado can also be authorised to transfer all the utilities into your name, set up the direct debits for those, your community fees, your IBI/Suma and your taxes.
Now you are the proud owner of your own Spanish Dream Property!
We recommend you take out both buildings and contents insurance for your home which can be done through the bank, a Spanish based insurance broker, or one of the companies in the UK who specialise in second home insurance. We also recommend that you now instruct your Abogado to draw up a Spanish will to cover the inheritance of the property and minimises any unnecessary complications should the need arise.