The Buying Process
The key to the successful purchase of a property in Spain is to understand the buying process and the costs involved in doing so, here we will help you understand these points further in relation to purchasing a property on the Costa Blanca.
All property transactions in Spain must be approved by a registered Notary, a legal representative of the Spanish government. Only Notaries can register you as the rightful owner of a property in Spain’s Land Registry, which they do after witnessing the signing of the deeds (Escritura) by the buyer and vendor, and ensuring all associated payments and taxes are paid.
Once you have found your dream home it is standard practice that a “reservation” is signed to secure the negotiated price of a property, this reservation requires that a “reservation fee” is paid to secure the sale at the agreed price. This fee is usually around €3,000 and forms part of the price paid for the property.
Before you get to the final stage of signing deeds in front of the notary, what we call completion in the UK, your independent lawyer (Abogado) will perform due diligence on your chosen property.
To buy a property as a non-resident in Spain you MUST obtain a fiscal identification number, known as an NIE (Número de Identidad de Extranjero) and open a local bank account in Spain. Ensure you do this in good time before the planned completion date with the Notary. Again, your lawyer can help you do this.
Opening a Spanish Bank Account
You will need to open a Spanish Bank Account. Any bank of your choice will do. Many British Banks do have branches here in Spain, you will need to check with them for a convenient location to the property you wish to buy. Alternatively the Spanish Banks are also a good choice. Choose a bank that has an English speaking staff member. To open your account you will need your Passport and a proof of income (P60 Tax Form, or if on a pension, your proof of pension).
Aside from the cost of the property what additional costs will apply when purchasing in Spain? As a general guideline you should allow a budget of a further 10-12 per cent, dependent upon the purchase price of the property to cover all taxes and fees. If you are buying with a mortgage, costs will be slightly higher than if buying outright.
If the property you are buying is a resale property (Not a New Build), as a guide the 10 – 12 per cent can be broken down as follows:
- Transfer tax (ITP), which is 10 per cent of the property’s purchase price
- Notary fees (fixed on a sliding scale but typically €500 – €900)
- Land Registry fees (roughly half the cost of notary fees)
- Independent lawyer’s fees, approximately €1,500 including IVA
The extras for anyone buying with a mortgage would typically include: a valuation (circa €350), stamp duty (AJD) of 1.5 per cent of the mortgage deeds (capital loaned) and a lender’s commission (typically 1 per cent of the capital loaned) as well as Notary and Land Registry Fees.
Costs for a new build property, which should come with a Licence of First Occupation, are slightly different. Transfer tax is not payable, but instead VAT (IVA) is payable at 10 per cent of the purchase price and stamp duty is also payable at 1.5 per cent of the purchase price (without VAT). Notary, Land Registry and legal costs will also apply.
Annual Council Tax
As a home owner on the Costa Blanca, you will have to pay annual council tax, known as SUMA, as well as a tax for rubbish collection.
In addition to that, you will need to think about the usual running costs that come with home ownership, from electricity bills to community fees (if your property is part of a complex). Check a property’s running costs before buying it, so you know what to expect if you were to become its owner. Your estate agent should be able to give you a full breakdown of these.
First Time Buyers
It’s not unusual for first time home owners to require assistance running their property and coordinating the outgoings it incurs. A Castle in the Sun will assist with any queries or issues relating to home ownership on the Costa Blanca. It does not matter if you are here in Spain or anywhere in the world, we are here to help your Spanish property experience enjoyable.