Property Buyer's Guide

Steps to buying a property in Spain

This is a general guide to give an idea of the steps necessary to purchase your property.

Our staff will guide you in all matters and our research, experience and professionalism, not forgetting our after sales service, will ensure you a stress free process in buying your property.

1. The Spanish Tax Ministry requires all owners of property to have a fiscal identification number or N.I.E. (Numero de identificacion de extranjeros). This is obtained prior to finalizing the purchase and nowadays the applicant must attend in person. Your solicitor will organise this process and a member of our staff will accompany you on the date of appointment.
   
   
2. The second requirement is a Bank account. Everyone who buys a property in Spain must open a bank account in Spain. This will be used to transfer monies for the property you are purchasing before completion. It is also necessary to allow your solicitor/fiscal representative to set up regular payments for electricity, water and other utility bills.
   
   There are many banks in Spain. We would advise you to shop around for rates. You can open a bank account at any time, all you need is your passport and Mediterranean Ocean Properties would be happy to help you with this process should you need it.
   
   
3. The third item is not a requirement but we think it is of very high importance and recommend all our clients and investors to make a Spanish will. Once a will is made in Spain detailing your wishes for the property, it allows your Spanish solicitor to process same in line with Spanish legal and fiscal requirements. A will in the UK or Ireland or elsewhere will cause many expensive problems re jurisdiction, inheritance differences, etc. and likely involve great delay in finalizing matters.

As we have mentioned, we will guide you with Solicitors and Fiscal professionals with whom we work and trust to look after your interests. Your solicitor will process all the deed transfers, ensure proper title, translate all contracts, arrange national identity numbers, ensure there are no outstanding debts on the property and in short safeguard your interest in all matters.

Buying and Maintenance Costs

Residential property is subject to I.V.A. (like UK & Irish V.A.T.) at 7% of new deed value.

Commercial property is subject to I.V.A. at 16% of deed value. The investment structure will determine if this tax can be offset against trading or sale tax.

The Spanish Notary will charge stamp duty on the property transfer and there will be other minor charges for searches etc. which will result in a total charge from Notary of 1½% to 2%.

The legal fee to your Solicitor is the final cost and overall with the above taxes included we suggest you budget for a figure of 10% to cater for all items.

Maintenance Costs Year to Year:

These ongoing costs are:

Electricity: metered and paid by debit through bank account.
Water: metered and paid by debit through bank account.

If the property is part of an Urbanizacion there will be a community fee to cover the costs of running the scheme such as maintenance of green areas, communal pool, daily waste collection, repairs and so on. The cost will vary dependant on size of Urbanizacion and communal areas and communal land plot but a guide is €250 to €500 yearly.

There is a Non Resident tax payable to Spanish Tax Ministry. This is based on a notional income levied by the Ministry. The charge is 25% of 2% of the deed value.
Example: If deed value is €100.000 then the tax due is 2% of €100.000 @ 25% giving the following liability:

There is also a wealth tax for non residents and this is based on a percentage of the deed value recorded with the Land registry called the catastral. This tax will be less than the Revenue tax above. The deed value will depend on many factors such as, length of time since last change of owner, location of property, size of plot and so on. A guide is approx 50% of Revenue tax which based on the above example would be €250.

In general when we talk to our clients we suggest an ongoing cost of €1500 per year.

If required this can be offset with some holiday rental. The income from holiday rental is very good for property in good location. If holiday rental was an option then 5 weeks summer rental would cover the yearly cost above.

Capital Gains Tax

Spanish residents and people who become Spanish Residents pay capital gain tax at 15% with reductions for length of ownership and whether a new property is bought and also the age of the owner. Residents over 65 with 3 year + ownership are not liable for tax.

Since 1 January 2007, the Spanish Tax Ministry has reduced the capital gain tax for non residents to 18%. This was previously 35%. On the date of sale a 3% withholding tax, based on the new deed price, is passed to the Tax Ministry as a payment for this tax. The balance, if any, will be notified at the next tax return. Should the 3% result in an overpayment this will be refunded within some months. Your solicitor will organize the application. Expenses incurred during the sale etc. can be offset against this tax.

There are reductions allowable against this tax for non resident’s.
For example:

Property purchased since 1994 can apply an inflation factor to reduce the liability.

All expenses in buying and selling, i.e. taxes, notary fees, legal fees etc. can be offset. Receipts and invoices must be available.

The reduction of Capital Gains tax to 18% since January 2007 is great news for existing and new investors and we expect the market to improve at a faster pace making now a great time to invest or buy your property on the Spanish Costa’s. 

Mortgages

It is becoming more frequent for people wishing to invest in a home in Spain to finance this undertaking by taking out a mortgage. This can be done by a top up of an existing mortgage or by arranging a new mortgage on your Spanish home. Currently banks will lend 70% of the sale price (excluding the VAT and Notary fees) and a higher percentage can be obtained if the bank's appraiser gives the property a higher valuation. The amount of the mortgage is dependant on the valuation the appraiser places on the property and not the sale price.

A mortgage to fund your purchase can be arranged in the UK or Ireland or alternately in Spain. For residential property, a 70% mortgage can be organized. The valuation for the mortgage is made by the bank in Spain and this valuation determines the mortgage. In many cases our properties are valued in excess of sale price enabling our clients to secure virtually, a 100% mortgage.

The mortgage interest rate is very competitive. Rates will likely be better in Spain but the set up cost is likely to be somewhat higher.

Again, we will guide you in all aspects to ensure you are aware of all options and costs so you can make the best decision for your own circumstances.

In relation to Commercial investment the structure of the investment will determine the optimum mortgage arrangement. Click here to see our presentation document

Mediterranean Ocean Properties has an excellent working relationship with several large banks and can arrange comparison quotations for you. Please contact us if you have any queries or wish to discuss any matter further.

Aftersales Service

Mediterranean Ocean Properties provides all our clients with an excellent level of aftersales care and we pride ourselves on this exceptional service. We help all of our clients through every step of their property purchase.

Mediterranean Ocean Properties will provide you with regular updates of the development of your new build property throughout the period of construction.

On completion we will also help our clients perform a comprehensive snagging list on the property to ensure that the property is finished to a high standard.

Our aftersales service also includes a long list of services that we can help clients with:

• Locating furniture for new properties
• Fitting of alarm systems
• Introduction to management companies for property rental
• Introduction to builders, plumbers, carpenters, handymen etc
• Introduction to mortgage providers
• Introduction to solicitors and fiscal advisors
• Currency transfer
• Taxi services to airports
• Locating accommodation during construction of property

If you can think of anything please let us know we are always ready to help.

Viewing Trips

If you are genuinely interested in buying a property, our viewing trip will give you the opportunity to view the many areas and properties and help you make the decision on which one is right for you. We highly recommend our viewing trip as an ideal and cost effective way for you to view and find your dream home. We assure a "no pressure" trip and we offer a very personal one to one tour.

The cost of this trip is €175 per person and includes

• Flights
• Accommodation
• All transfers
• Full trip of the area and as many properties as you would like to view

If you have found a property you like why not come and see it. We can show you as many properties as you wish to see that will meet your criteria and find you the holiday home you always dreamed of.