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Spanish Property Buying Guide

Buying property guideMany people dream about buying a home on the Costa del Sol attracted by the unrivalled opportunities for fun, with golf and water sports for the energetic, along with great shopping and restaurants. Hot in summer, warm in winter and open all year around.

Buying property in Spain can be a straightforward affair, but things can go wrong, and costs spiral, if you blunder into a purchase without enough knowledge of the conveyancing process and the property market.

It  helps to know about the costs and challenges you will face once you own a property in Spain, as property ownership comes with costs and responsibilities.

New Builds VS Resales Properties

If you are flexible with the “moving-in date” new builds or off-plan properties are your best bet. Nothing beats moving in a brand new home of beautiful modern design customized to your needs. New homes are also more energy efficient, everything works perfectly and come with a 10 year guaranty by law.

Legal & Financial Consulting

The lawyer is your most important team member. Your best bet is a lawyer that is also a fiscalist so that he can give you a full view of all the applicable expenses to be incurred.

Fees vary depending on the services provided, but are unlikely to be less than 1–1.5% of the property value, plus VAT.

  • Contact and negotiation with estate agent the terms of the purchase
  • Obtaining your NIE number & opening bank account
  • Performance of due diligence proceedings
  • Explanation of applicable expenses to be incurred
  • Drafting, preparation and review all of the documents
  • Communication with Notary to review necessary paperwork, and assistance on the date of completion
  • Execution of payment of taxes (Transfer tax/ VAT), Notary and Registry’s fees

The Buying Process

New & Off-plan

The first thing the developer will ask you is to leave a deposit (the deposit will be deducted from the Private Purchase Contract amount). The agreement should be subject to preliminary legal checks, mortgage loan availability on the property and a building survey, the deposit should be returned if there are problems. 
1 month after the reservation the developer will ask you to sign the Private Purchase Contract and pay 10% minus the amount payed for the reservation.

  • Reservation Deposit: € 10,000 – 30.000€
  • Private Purchase Contract: 10% (Minus Reservation Deposit)
  • 1st Payment: Usually 30%
  • Balance upon building completion.
*Note that payment methods will vary from one developer to another. In some cases, developers will ask for scheduled payments during the construction period.

Resales

Buying a second hand home is a little more straightforward. The seller will ask for a reservation deposit to take the property off market and you will have to agree on a date to finalize the purchase: Sign the deeds, complete payment & get the keys to your new home.

How long between the reservation and finalizing the purchase? This is to be negotiated, the minimum time should be 1 month as your lawyer needs time to do the Due Diligence process and make sure everything is ok. If you need a mortgage, you will need a little more time.

  • Reservation Deposit: € 10,000 – 30.000€
  • Balance upon purchase completion

Fees & Taxes

New & Off-plan

The costs associated to the property purchase can be as much as 13% extra for buying costs and tax, and 2% more if you are going to get a mortgage , which is made up of the following:

  • Taxes (IVA/VAT): 10%
  • Stamp Duty (IAJD): 1.2%
  • Registration & Notary fees: 1%
  • Lawyer Fees: 1%

Resales

The costs associated to the property purchase can be as much as 13% extra for buying costs and tax, and 2% more if they are going to get a mortgage , which is made up of the following:

  • Transmission Tax (ITP) : 7%
  • Stamp Duty (IAJD): 1.2%
  • Registration & Notary fees: 1%
  • Lawyer Fees: 1%

Getting a Mortgage

Many buyers will finance their house purchase with a mortgage which will incur extra costs such as the Mortgage stamp duty (1%) and the Bank mortgage commission (0.25%). The bank will insist that the property be registered in your name. The contract of sale, receipt of funds and constitution of the mortgage will happen simultaneously, so an agent from the bank will be present at the signing of the deeds and will forward the money to the seller.

The mortgage provider will normally require the following documentation:

  • Income tax declaration for the past two years
  • Bank statements from the past year.
  • Payroll or other proof of income for the past six months.
  • A list of mortgage loans already held.
  • A statement of your assets and liabilities, confirmed by an accountant.
  • Copy of your passport

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