It’s a good time to buy and we are seeing many people who perhaps thought a house in Spain was out of their price range, suddenly realising that they can buy one after all.
Once you’ve got the idea, then the next step is working out just how much you can afford to spend. It is at this point that it’s very important that you not only take the cost of the property into your budget but other factors as well.
The process of buying a house involves additional expense. This should come as no surprise if you have bought property in any country before. It’s not confined to Spain!
In your enthusiasm and without inside knowledge, it can be easy to underestimate just how much it will cost. This can prove very difficult if you find at a later stage that money you had to set aside to equip your property in Spain is being sucked away by the essentials of the purchase process itself.
We advise that before you establish the type of house in your price range, you make sure that all costs are taken into consideration. This will help avoid disappointment or financial difficulties at a later stage.
What costs can I expect?
The additional costs that you can expect can be divided into four groups:
- External costs
- Legal fees for the purchasing process
- Banking procedures and money exchange
During the buying process you will need to sign in front of a Notary. The Notary is a professional within the Spanish law system who legalises agreements and contracts. The scale of Notary charges is fixed by law and the actual amount to be paid will depend on the extent of the legal provision of the Title Deed. Charges start at 800 euros.
Once you have signed at the Notary’s, the Title Deed will then need to be inscribed in the Spanish Land Registry (Registro de la Propiedad). This is an official registry that protects the rights of the owners of a Spanish property. The fee depends on the value of the property but normally starts at 400 euros.
During the purchase process there will also be taxes to pay. There are different types of taxes depending upon whether the property you are buying is new or resale.
|Type of property||Tax payable|
|New build||IVA (VAT) 10% Stamp duty (AJD) 1.5%*|
|Resale||ITP (transfer tax) 10%*|
* Dependent on where your property is located
Both new and second hand properties have Plusvalía to pay. This is a tax paid on the increase in the value of the land and the exact percentage is decided by the local tax authority. How much it comes to is dependent on location, land size and how long it is since it last changed hands. Plusvalía is legally the responsibility of the seller.
Of course, the lawyer who is representing you will want paying too. An independent lawyer will represent your interests and check out the legalities and contracts from your point of view. It is important that you have this kind of representation; you are already paying out a lot of money for a property and you want to be sure that everything is in order. How much your lawyer charges can vary substantially. However, you should allow for between 1,000€ and 1,500€.
Banking procedures and money exchange
Transferring money from one country to another can be a costly procedure. To buy a house it is likely that you are moving a significant amount and you need to be aware of the charges that are levied by the banks for this service. When you buy a house and transfer your money you can find that up to 4% of the total sale price is lost. If you use a SWIFT transaction there will be a charge of around 0.6% of the amount you are transferring.
If you want to keep the costs down of moving your money you can use a currency exchange company. These companies have bank accounts in both countries and avoid transfer deductions. As money is deposited in an account in one country the equivalent amount is withdrawn from the account in Spain.
If you have to take out a mortgage to buy your property you will need to build in to your calculations the cost of administration that the bank will charge. This can be quite steep, amounting to around 2% of the mortgage itself.
When you do come to pay for the total service, make sure that you ask for an itemised bill rather than accepting a total amount. You should be given the original invoices for the notary fees, the Land Registry charges and the taxes you have paid. Make sure you keep all your invoices and receipts, just in case.
It does all mount up, but being clear about the final cost from the outset will mean you can plan your budget and buy the ideal property that’s still within your means.
This article is based upon the information supplied in our property conveyancing handbook; ‘Buying a property in Spain’.