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Page 1 of 4 Buying Property in Spain - MortgagesBuying a House, Apartment or Property in Spain The whole process of buying any type of property or land in Spain is strictly regulated. Firstly you should decide how you would buy your property. There are three options: * Buy for cash - a straightforward option, but once capital has been invested in a Spanish property it can be difficult to release equity although not impossible in some circumstances. * Re-mortgage your main home to raise the cash - again, a straight forward option and one that doesn't involve you having to deal with any Spanish banks, but you will probably find that the interest rates charged by banks and building societies in other countries may be higher than interest rates in Spain. Bear in mind the mortgage warning "Your home may be repossessed if you do not keep up repayments on your mortgage". You may be putting your main home at risk for the sake of your holiday home. * Finance your property with a mortgage from a Spanish bank or mortgage provider. Prepare yourself for the initial costs Whether you are buying for cash or with a mortgage there are some costs you are going to have to fund yourself. * The Deposit as your agreement to the purchase - On the day you sign the Option de Compra (the sales agreement contract) you will be required to pay your deposit, usually between 5% and 10% of the purchase price for older properties. For new properties under construction the payment terms are made in stage payments as the construction is completed. These terms should be negotiated through your agent or directly with the constructor. It is advisable to pay your deposit cheque to your agent who is representing you and not to the vendor. The deposit is held by the agent until completion. * Purchase Costs - For all property and land you will pay a 7% of the purchase price, which is a property tax that goes to the Spanish Treasury. In addition you will have Notary fees and land/property registration fee, which varies according to the purchase price of the property. You can choose your own Notary. * Estate Agency fees - Normal commission is 5%, which is included in the sale price. * The costs of a mortgage Mortgage Mortgage arrangements Normally, based on their valuation on the property, Spanish banks will lend between 60% and 70% to non-residents and 70% and 90% to residents. They will send a valuer to assess the value of the property, the cost of this is included in the charges made by the bank for the mortgage application, which varies according to the purchase price of the property allow about 1% but banks vary in their charges and can often be negotiated. Once you have applied for the mortgage you will need funds to cover the cost of the bank charges. The essential elements for qualifying for a mortgage 1. Sufficient income to service your mortgage 2. Life assurance to cover the terms of your mortgage, banks will insist upon this Working out your price range If you need a mortgage to buy your property, you should establish just what price range you should be looking at and whether you have enough cash funds for the deposit and legal fees and that your income is sufficient to afford the monthly cost of your Spanish mortgage. You should now be seeking professional advice, about the basic lending criteria and the various options and mortgage products available to you. Again you have a few options: * Go direct to the Spanish banks and mortgage providers - the majority have English speaking staff, others do not - which may cause you difficulties. They all have their own lending criteria - how much they will lend you, the term of the mortgage, what mortgage products they offer and how much they will charge for their arrangement fees. * Use the services of an established mortgage broker, who will advise you about how much you can borrow and the mortgage products which will best suit your circumstances. Your mortgage broker may save you some time and will know which lenders to approach on your behalf, whether it's dependent on the amount of deposit you have available or whether certain conditions should be taken into consideration, and will provide you with quotations from the lenders who are most suitable for you. Throughout the mortgage procedure your mortgage broker will liaise between you and the lender - very useful if your language skills are not that good. Mortgage brokers who are registered in Spain receive their commission directly from the lender and generally do not charge you a fee - but you should check - it is not always the case. * The Inmobilario (estate agent) may offer a mortgage service and usually will offer a service similar to that of a mortgage broker. Banks will ask for pay slips if you are an employee or one or two years accounts if you are self-employed and a tax declaration on both cases from your country of tax residence. Life assurance It is a requirement that all mortgages in Spain are covered by life assurance. Many of the Spanish lenders insist that you use their policies and that it covers all the terms of your mortgage. Some lenders have different policies and insist that full disability cover is included as well as life cover. Finding your ideal property |
