The Spanish Buying Process

Spain has a long tradition of overseas property buyers. The Spanish market caters for many different needs and desires – from clear waters and long stretches of beach, to the bustling city life, to a country getaway. The older generation also favour Spain as a place to retire to. However, just because it has had a long history of foreign property investors, it doesn’t mean to say that it has been without it’s problems.

The mortgage market in Spain is highly active. Over two hundred local banks offer some sort of home loan product directly aimed at overseas investors. Mortgage options vary greatly from deal to deal and bank to bank, however Spanish property law dictates the maximum you can borrow is 70% of the property value. Most lenders will also not lend you beyond three times your income, although some international banks may be able to increase this limit slightly. As is the case in most countries, lenders prefer people with solid, continuous employment.

To buy a property in Spain, you must first get an NIE number (a taxation identification number). This number is important because you will need it for most steps in the buying process. Any local solicitor should be able to help you get one, if you give the lawyer the power of attorney. If you do do this, it is important to find a solicitor that you trust, and one that has your best interests in mind to ensure that you get a good deal and you do not get ripped off.

After you have found a property you wish to buy, you will need to sign a ‘reservation agreement’. When you have signed this agreement, you must pay a small fee – generally 1 or 2% of the property value. The vendor will then withdraw the property from the market officially, and your solicitor can start all the formalities including land registry checks. Once the solicitor has confirmed that the property has a clear title and there are no outstanding debts on the property, both parties will sign a contract of sale. After you have signed this, you will be required to pay a deposit of about 10%.

If you are buying off plan, your builder should give you a copy of the insurance cover or bank bond at this stage to ensure that your investment is safeguarded in case the builder does not complete the project.

Once all the formalities have been completed, both the vendor and the buyer along with their solicitors and bank representatives (if you are buying via a mortgage) must go to the public notary’s office to sign the finalised contract. At this point, the title deed is transferred into the buyer’s name.

The costs associated with the property will vary, depending on a great number of factors. Generally, new properties have a 7% VAT duty added along with 1% stamp duty. Older properties do not have stamp duty paid on them. If you are buying the land, there will be a 16% VAT charge plus 1% stamp duty. Some other costs you will need to factor in are land registry fees, lawyer’s fees, notary charges and mortgage charges.

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