The financial elements of the purchase of a Spanish property can have an influence on your financial situation now and in the future. Thus it is important that you get a good grasp of what these financial elements will be. Aside from the initial and total costs, you must also consider the extra costs due to taxes, interest rates and exchange rates. What follows is an introduction of the factors that will affect the final cost of your Spanish home and should only be used as a guideline. Several things can happen in the economy that could affect the change in the values given here. For further information we can recommend to seek professional advice.
If you are planning to apply for a mortgage you need to choose between getting your financial loan in Spain or from a bank in another country. The following factors will naturally have an impact on what you ultimately decide: where your savings are, fiscal advantages obtaining a loan and financing a property in a country versus another, exchange rate fluctuations, interest rates, etc…
In Spain, if the property you purchase is off plan, you can normally get a loan from a bank
through the developer but for second hand properties you will have to find a bank on your own
(although many estate agencies are willing to assist their clints with this). In general, the bank
will ask you for copies of your passport, payslips, or proof of savings, sale contracts and copies
of title deeds. The bank will usually give a loan from 60% to 80% of the appraised value of the
property (which is not necessarily the same as the price you are paying) and for up to 30 years.
You should be
cautious with the type of interest rates the bank offers as it will affect the sum you will have
to pay each month for quite a few years. If your savings are not in Euros, you have to keep in
mind that exchange rates can fluctuate very fast and change for the better or for the worse. It
is therefore wise to fix the exchange rate by buying what is called a forward currency contract
or a spot contract. Financial companies and banks specialized in these types of operations or a bank can
provide you with this service.
Even if you do not need a loan and can pay the whole amount in cash, you should still consider taking a mortgage. Banks in Spain offer low interest rates and such loans can free up capital so that you can make better investments other places. Furthermore a mortgage could represent an important fiscal advantage with lower inheritance tax in the case of death of the first spouse.
The initial cost of buying a Spanish property will represent about 10% of the total final cost of your property. One of the first costs involved in acquiring a new property (off plan) is the VAT and the stamp duty: 7.5% of the total price of the house. In the case of a second hand property you will have to pay the transfer tax: 6% to 7% of the total price of the property.
You will also have to pay for a new official title deed ‘la escritura’ in order to secure the transaction. This document signed at a public notary states the specific owner of the property and costs around 500€. This price can vary depending on the price of the real estate. In Spain properties have to be registered in the ‘Registro de Propiedad’ and you will have to have the title deed changed to your name. The latter registrations will cost you around 400€ again varying on the price of the property.
Aside from these mandatory paperwork expenses, it is recommended to get an independent lawyer before you decide to buy a Spanish property. A lawyer can assist you and advice you for a cost of approx. 1% of the price of the house you intend to buy.
The application fee for a mortgage is approx. 1% of the amount of the loan. This ends up being about 0.7% of the total cost of your property if you consider that the bank will lend you between 60-80% of the total price.
The last costs you will have to think of are the property tax, the stamp duty and tax IVT or plusvalia. The vendor is supposed to pay the IVT tax, but it is often to the buyer to do so, tied by the contract. It takes into account the rise of the value of the land since the last time it was sold. Depending on the size of the land and the last evaluation you will have to pay a more or less important amount. Thereafter, you have to send a notification to the municipality and the catastral office in order to be able to pay the yearly taxes.
Aside from the loan to repay, there is an annual cost in duties and taxes to own a Spanish property. There is a tax payable to the local government that is around 0.5% per year of the official value of the property. The official value of a property is usually less compared to the real value of a property and it can vary from one area of Spain to another.
If you are the proprietary you need to pay a wealth tax which is the value of the property subtracting outstanding debts on the house and its mortgage. The so called 'valor castral' corresponds to a value of 0.2% to 0.5% depending on a variety of elements (i.e. how many people own the house, the value of the property, your residency in Spain).
If you do not live in your property or own several properties you will have to pay the Attribute Tax (about 0.5%). It is classified as an income tax and thus differs for residents and none-residents. If you own community properties (apartments and houses with shared facilities), you will have to pay around 30-300€ every month for maintenance, cleaning, pool, gardens, etc…
Buyers who are interested in renting out their Spanish real estate should be aware that you have to pay income tax on the rent you charge depending on your other earnings and residence status in Spain. You must also have fire insurance in case of an unfortunate accident.
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