EVERYTHING YOU NEED TO KNOW ABOUT BUYING REAL ESTATE IN SPAIN
A LITTLE INFORMATION
Foreigners set a record for home purchases on the Costa Blanca, more than 23,000 in 2019.
The number of foreign residents is increased from 4.2% in 2007 to 10.2% in 2019, non-residents make up 7.8%.
Among property owners living in Spain, investors from the countries of the European Union, including Norway, which account for 53% of all home purchases by foreigners, stand out. The share of this group reached 58% in 2015. The British are still the main homeowners of foreign origin in Spain, although the uncertainty caused by Brexit reduced its weight by six points between 2007 and 2019, accounting for 8% of purchases last year. They are competed by immigrants from the eastern zone of the EU 12%, and Italians 8%.
Among citizens of non-EU countries, the nationality of home buyers, which stands out the most, are Moroccan citizens, who make up 14% of the total, and Chinese citizens 6%.
84% of purchases come from EU countries, in which case the British also stand out. 23% of home purchases made by non-resident aliens between 2007 and 2019 were made by citizens residing in the United Kingdom. They are followed by Germans and French with 12%, Belgians 10%, and Swedes, who acquire 8% of the total.
The coast and islands of Spain are the most attractive places for investors. In particular, in the province of Alicante, the weight of home purchases by foreigners compared with the total was the highest, and amounted to 38%.
Acquisition operations carried out by foreigners continue to grow, they reached 17% of the total. If this is your first time buying property in Spain, the process may seem complicated. This is actually not the case. With our help, this process will be simple and enjoyable.
Basic purchase rules:
First of all, decide on a budget and calculate your financial capabilities. Wasting time and money on finding a property for which you cannot pay can be very frustrating.
If you need to resort to a mortgage, then you will need to contact the bank to study various options. In Spain, non-residents can get a mortgage, given that the buyer meets the requirements for income and solvency. We recommend that you do not make a request for a mortgage loan that exceeds 50% of the value of the property: from experience, most of these requests are rejected by the bank.
Weigh your financial possibilities before making a trip to Spain.
PURPOSE OF PURCHASE
Buying a property for permanent residence or as an investment are two different things: in the first case, you need to focus on your personal needs, in the second – on the high rental potential of the housing.
Clearly state the purpose of the purchase, how you will use it, and then you will be able to clearly determine which housing suits you.
We always start a conversation by finding out the purpose of the purchase. Very often they turn to us with an already formulated goal.
The correct location of the property depends on your preferences. You can choose a property located directly on the coast, or several in the “depth”. It is necessary to pay attention to:
- Liquidity: rental, resale
- Infrastructure: proximity to the beach / city, schools, shops, green areas, pharmacy, parking, security of the area, floor and views
- Take into account the distance from the airport, the frequency of flights and the cost of tickets.
Therefore, it is better to use the services of an agency that will quickly guide you through the area.
An ideal option for a study trip is a visit on weekdays with a duration of 3-4 days.
DATE OF VISIT
Together with the agency, agree on a calendar for your visit to Spain. The ideal length of the study visit is a visit on working days of 3-4 days. On weekdays, access to all real estate is guaranteed, as well as visits to bank branches and consultations with a lawyer.
We recommend avoiding the coincidence of your stay in Spain with holidays, which will complicate the visit to some sites.
We are talking about a clearly planned visit by our agency to the Costa Blanca within 3-4 days, during which you will be able to visit the selected real estate objects, cities and areas that strictly meet your requirements.
Thanks to the constant help of a qualified manager, your visit will take place in an organized, without loss of time, route that has been planned in advance, and most importantly, you will instantly receive answers to all your questions.
The visit includes:
Meeting at the airport and transfer to the hotel, visiting previously selected real estate objects, exploring the areas and cities where it is located, visiting a lawyer and a bank, all consultations related directly to the selected property and the process of buying property in Spain as a whole, accompanied by a personal manager and consultant throughout the visit, and much more. These costs, and under certain conditions, and some others, are completely borne by SOLANASPAIN.
Important! A visit to view real estate is time and financial costs for all parties. SOLANASPAIN is the sole responsible person for its implementation. Therefore, this offer extends to potential clients of SOLANASPAIN agency who are ready to go through all stages of real estate purchase exclusively with our agency.
A study tour is planned in advance.
Visit of pre-approved facilities and detailed acquaintance with the area. A thorough inspection of the property or, in the case of a purchase from the plan, studying the quality specifications, the master plan of the housing complex, its furnishings …the completion date and the delivery of keys.
ELECTION AND RESERVATION
As soon as the object is selected, a reservation agreement is signed (in some cases, a private purchase and sale agreement is signed immediately) and a reserve is paid, the amount of which will be indicated by the seller.
After signing the reservation agreement and paying for the reserve, you need to open a bank account and order a NIE (alien identification number). The form of payment and the payment schedule, which must be strictly adhered to, will be written in the contract you signed.
In the case of non-resident clients, we usually provide a translation of the contract of sale in the buyer’s language, but it should be borne in mind that legally these information translations are not legally valid, since, according to Spanish law, the Spanish Text prevails over translations. The reservation agreement and the sales contract can only be signed by the Buyer and Seller
The date of signing the notarial deed of purchase and sale and delivery of keys will also be indicated. Therefore, a second visit to Spain will be organized by the time this act is signed.
LIST OF DOCUMENTS REQUIRED TO BUY A PROPERTY
An individual or legal entity who is not a resident of Spain and intends to purchase real estate in this country should take into account that, depending on the country of origin, these requirements must be observed and the following documents must be provided.
PRIVATE SALES AGREEMENT
The signing of the contract of sale implies the formal agreement of both parties;
the buyer must pay the amount on time for the price,
and the seller – to build and rent the house in the agreed time.
The signing of the contract can be at any sales office of the developer, or it will be
sent by courier to the client’s address, without the signature of the developer.
In the case of a turnkey product, it is important that the buyer signs a contract before returning to his country, especially if he is a resident of a non-EU country.
Documentation signed by participating parties:
• 2 copies of the contract of sale
• 2 sets of plans (residential complex plan, floor plan, plan for a specific facility and, if applicable, parking place)
• 2 copies of the quality report
• 2 lists of equipment and household items selected by the customer (if applicable)
PAYMENT METHODS AND DELIVERY DATES AGREED IN A PURCHASE-SALE AGREEMENT BETWEEN THE BUYER AND THE SELLER
It is the obligation of both parties to strictly comply with what is agreed in a private document and, therefore, any variation must be agreed between the buyer and TM. Only the owners of the sale will make payments to the account of the owner company and on the dates agreed upon in the contract. In addition, we send an email to buyers to confirm receipt of quantities.
Regarding the delivery date of turnkey product keys, it is necessary to have at least 21 days to equip, contract water and electricity supplies and clean the property; In addition, the client must provide all the necessary documentation for the signature. If the product is “turnkey” and the delivery on account is less than 10% the PVP, with a minimum of 10,000 .- €, the contracting of supplies and equipment of the home will be after the total liquidation of the property and / or public deed signature.
It should be borne in mind that until all the property, equipment, reforms have been paid in full, the keys will not be handed over or the public deed signed. Therefore, it is essential that before booking or scheduling the trip to Spain for the delivery of keys, you must contact us (email@example.com), since you will be the only person at the time of acceptance – surrender at home.
NOTARY ACT OF PURCHASE
Although the private document – purchase agreement – is fully valid, the public deed is required to register the property in the Property Registry and to obtain a mortgage loan. The public deed overcomes the private document for several reasons:
- Evidence: it validates the sale against third parties, guaranteed by the notary’s faith.
- Legal security: the notary with his professional performance provides legal security, through various checks: requests information from the Property Registry (simple note), where it is specified who is the owner, if the house has charges or other liens; once signed, it is presented electronically the same day to the Land Registry; and it verifies that the property is up to date with the payment of the expenses of the Community of Owners; Request information to the cadastre, through the last IBI receipt.
Advice: the notary is a legal professional and among his functions is to advise and advise free of charge. It is also impartial and in fact must provide assistance to those who need it most.
The notary will ask the buyer for the following documents and requirements: Valid passport and / or original identity card, NIE, Military permit (if necessary), the marriage financial status of the buyers, documentation to check and record how and when the house has been paid, a translator (if he does not understand the Spanish language) and provide a tax representative.
INFORMATION YOU NEED TO KNOW
WHAT IS THIS NIE
Property buyers arriving from outside Spain, however, will need to get one. NIE stands for number of alien identification and is essential for buying property, obtaining mortgages and getting utilities connected; certainly anything that involves paying tax.
It is not complicated to get, but it can take from one day to six weeks. Since you need it to sign the writing, you will need to apply at an early stage in the buying process. It is often the first thing you do after agreeing on a property, and often the estate agent will help, taking you down to the immigration or tax office and ensuring you have all the correct documentation.
Most people apply in person but you can also apply via a Spanish embassy or consulate. You can apply through a representative, or by post.
How you may apply can vary between regions. To apply in person you go to an immigration office within a specially designated police station. You must take the following documents:
- Original and one copy of your current passport. If you provide only one copy, it should be notarized
- Official form (EX-15) filled out. When you have paid the small fee you will be given a date to come back and collect it (or there is a process for a representative to collect it for you)
You will also need the NIE to open a bank account. Money laundering regulations limit how much you can pay in cash and set out the choice of payment methods as part of the sale agreement.
Payment will normally be by bank transfer or bank check, so it is sensible to open a Spanish bank account and transfer funds from your account.
COSTS OF BUYING PROPERTY
Who do you pay?
TO THE SELLER:
NEW HOUSING. the price of the property and the Value Added Tax (VAT), in the accounts of the business owners of each development / development. In Spain, the general tax rate is 21%; however, on purchases and sales of newly built real estate, when it comes to the first transfer, 10% is applied to the price. When the down payment document is signed and / or the contract is specified.
We must also take into account the amounts of the water and electricity contract. The commercial department of your urbanization has the exact amounts. The payment, specify the location of the property, the selling merchant will be seen upon delivery of the keys or they will be charged directly to the buyer’s bank account.
SECONDARY HOUSING. Property Transfer Tax (ITP) 10% of property value.
The client can purchase a home and a maximum of 2 parking spaces and storage rooms at 10%; if you acquire a third, this would be taxed at 21%. If you purchase only local parking spaces, you must also pay 21%.
TO THE NOTARY: They go in proportion to the value of the property and the fees are applied according to previously established tariffs; They apply both to the deed of sale, and to the mortgage in your case. The Buyer will have to pay all the notary fees and we expressly indicate this in the purchase-sale contract.
TO MANAGERS: the amount of their management services in case they have been contracted. In the event that there is a mortgage, the management will be made through the agency of the financial institution.
TO THE PUBLIC TREASURY: the Documented Legal Acts Tax, corresponding to the Autonomous Communities, the amount of which ranges between 1% and 1.5% of the sale price stated in the deed. If there was a mortgage, he would also pay between 1% and 1.5% of the total mortgage liability.
TO THE PROPERTY REGISTRY: the fees corresponding to the registration of our property rights and the mortgage, if any. The amount of the registration fees is established by a regulatory fee or rate and varies according to the value of the property.
INTERPRETER: being the non-resident buyer, you will need the services of a translator to sign the deed before a notary, unless you express and demonstrate that you understand the Spanish language.
TAX REPRESENTATIVE: in the event that the buyer is a non-resident, he will need a representative to fulfill the tax obligations for having a property in Spain, including obtaining the NIE.
LAWYERS’ FEES: It is common practice (as a general rule) for law firms that are dedicated to real estate matters to charge between 1% and 1.5% calculated on the price paid for the property. However, in the absence of a fixed rule, this scale may vary, and will depend on the particular policy of each law firm. Hiring the services of a law firm is not essential, although it is usually recommended in the case of clients from non-EU countries.
An agency or a lawyer is usually in charge of these procedures, until the effective registration of the deed of purchase in the Property Registry (if there is a mortgage, the agency of the bank is mandatorily required). The normal processing time is usually approximately 1 to 2 months.
Once the property is acquired, the following annual payments will be taken into account:
Property Ownership Tax (IBI): it is a local tax, from the City Council where the property is located. It is calculated based on the value that the City Council grants to the property (cadastral value) and each city council applies its own coefficient. The term to make the payment varies in each municipality and they generally send a notification to the property. It is advisable that the payment be domiciled through a bank account, which guarantees that the payment is made within the established period and that surcharges are avoided. This tax is paid by whoever owns the property on January 1 of the current year.
Rubbish Collection Tax: This varies according to each property and is usually paid once or twice a year at a rate set by the local council.
Non-resident Income Tax: non-residents who are owners of an urban property located in Spanish territory are obliged to pay this tax. The tax base to declare is the result of applying to the cadastral value of the property (which is indicated on the receipt of Property Tax), a percentage that: in general it will be 2%
In the case of properties whose cadastral value is reviewed, modified or determined by means of a collective valuation procedure that has come into force in the tax period or within the ten previous tax periods, it will be 1.1%.
The resulting amount is understood to refer to a calendar year, so that if the ownership of the property is not held for a year, it will have to be prorated for the days in which the property is enjoyed. A tax rate of 19% will be applied to the resulting amount in the case of residents in the EU, Iceland and Norway, or 24% in the rest of the cases. The accrual of the tax is on December 31 of each year and the deadline for filing the return (model to be used 210) is throughout the calendar year following this date. The declaration must be presented at the Delegation of the State Agency where the property is located..
In case of rental of real estate by a non-EU resident in Spain, a tax of 24% (19% for EU residents) is not levied on the share of the cadastre, but on the entire rent received. Payment quarterly, tax form 210.
Welth Tax (Impuesto sobre el Patrimonio). Payable annually, based on the value of total net assets as of 31 December of each year, after the free allowance of €700,000. For non-residents, this will be based on the total value of their net assets in Spain. The rate varies from 0.24% to 3.03% at the time of going to press. As this tax is applied individually, if the property is owned by more than one person each of them will be taxed according to his or her share of the property. Tax form: 714
Community of Owners: if the property is part of a community, you will have to pay periodically (monthly, quarterly, semi-annually, annually) the corresponding fee. It is convenient to direct payments to a bank account in Spain.
Electricity, internet, water: you must have a bank account to domicile the receipts of the supplying companies: If they do not pay the corresponding receipts, the companies usually cancel the supply
NECESSARY DOCUMENTATION FOR THE FORMALIZATION OF THE MORTGAGE AND CONSTITUTION EXPENSES
DOCUMENTS REQUIRED FOR MORTGAGEЕ
To apply for financing for a home, it is necessary to demonstrate economic capacity to face the repayment of the borrowed amounts. The recommended debt limit on your monthly net income is usually around 35%. When studying the viability of a mortgage, a financial institution usually takes into account the following:
- Job stability: determines the possibility of borrowing in the long term.
- Annual income: payroll or equivalents.
- Financial trajectory: the client’s history is taken into account, if they have incurred defaults, late payment … Financial institutions request the client for a bank certificate that gives us information about the client’s financial trajectory and the debt acquired by the client that it allows them to know if the client according to his income can increase his indebtedness.
- Equity: real estate regardless of the asset to be acquired.
- Guarantors: other people who without buying the property guarantee its return.
- Other complementary guarantees: savings plans, pension plans, investment portfolios …
- If the buyer is a legal entity (company), in addition to providing all the documentation relating to the company, duly translated and apostilled, it is necessary to know:
• What type of company is: Public Limited Company, Limited Company, etc.
• Activity and corporate purpose: what it does.
• Seniority in the business.
• Participating partners: Who is the valid interlocutor and who will be in charge of managing the home purchase.
• Know your financial situation: Billing level, Net income after paying all expenses, approximate benefits, how they are distributed, etc. Possibility that partners personally endorse the operation.
• Equity in the name of the company and indebtedness.
It is essential to provide:
• Articles of incorporation and power of attorney, duly translated (by sworn translator) and apostilled.
• Tax certificate.
• Last balance sheet and Profit and Loss account (all pages).
• Proof of the properties in the name of the company.
In the case of non-resident companies, most financial entities request that the loan holders be natural persons; companies are only listed as non-debtor mortgages. Being necessary an agreement of the board of the company
authorizing the mortgage of a property owned by the company; Said agreement must be translated and apostilled. The financing percentages will depend on the country of origin of the client, but will never exceed 65-70% of the sale price..
MORTGAGE CONSTITUTION EXPENSES
The constitution of a mortgage, in addition to the costs of translation and management and procedures of the same, carries other expenses:
• Valuation: approximately € 400-500
• Opening commission: between 1-1.5%
• Cancellation commission: according to Law
• Compulsory insurance: according to Law, we are only obligated to fire insurance; but in practice, they tend to oblige to purchase home insurance and in some cases loan amortization
• Other products: cards, direct debits, etc.
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