Top Ten Tips
Owning a home in the Sun is the dream of many people who are looking for a good place to live in a nice location, however in order to make a dream like this come true, it is necessary to do some research so that you can find the right property at the best price. If you want to purchase property in an easy and hassle free way, then take a look at the 10 points below and apply them when you begin your search.
1. How much money do you wish to spend?
The first question is where is your money coming from? Is it tucked away in the bank or the building society, will it come from a second mortgage on your home in the UK or will you get it from the sale of your present home? You need to know that it is in place and ready to use before you make any decisions. If you are considering a mortgage in Spain then you need to have all the evidence necessary to show the bank how you will service the mortgage as well as telling your real estate agency so that they can direct you to properties that are mortgage-able. Your budget depends on what you have raised in your own country or the amount that you want to put down as a deposit for the mortgage.
2. Mortgages in Spain
They are much more expensive to set up but the interest rate is lower than many other European countries so you win in the long-term. "Foreigners" usually receive 70 to 80% of the bank valuation of the property, which is not necessarily the selling price. This means that you have to find 20% to 30% of the price of the property plus the costs of the mortgage: they are in the region of 250/350 euros for the bank valuation, 1% of the mortgage value for the arrangement fee, 0.3% notary fees for the mortgage and 0.3% land registry for the mortgage, plus any other lenders fees imposed.
3. Costs for Property Purchase
Generally you should allow between 10 and 12% of the purchase price to cover the costs of the actual purchase. Here is how this amount breaks down:
Lawyer – the usual charge is 1% of the purchase price of the property to cover conveyancing, searches, contract preparation and the visit to the notary to complete the purchase. Lawyers will often offer other services such as obtaining NIE numbers, changing utility services to your name, opening bank accounts etc. Take care though, you do not have to use a lawyer for the extra services and can often find these at less cost elsewhere. Always ask for an itemised quote before you agree to them doing this extra work and check with your estate agent for prices from other suppliers.
Taxes – Transfer taxes for a resale or a newly built property are 7%. These are set by the government and non-negotiable. Land Registry – All property transfers have to be registered and this will cost about 0.3% of the purchase price. Notary – In order to be fully legal all contracts for completion of a sale have to be signed in the presence of a Notary. Costs to the Notary will be about 0.3% of the purchase price, these cost are in addition to the costs of the mortgage stated above, all funds transferred need to have a verifiable paper trail, cash transactions cannot be used.
4. What kind of a property would you like?
Start with two columns, “must have” and “would like to have". The “must have” list will include the number of bedrooms, outside space and other things you need for your family including proximity to schools, shops or public transport. The “would like to have” list may include things like en-suite bathroom or extra bathroom, another terrace or patio, a garage or parking area, Jacuzzi, swimming pool, tennis court etc. Would you consider renovation? If so, you would need to have two separate budgets – one to buy the house and one for the work. Alternatively, put your renovation and purchase budget together and buy something that needs little or no work. Make this a joint/family discussion so that everyone has the opportunity to put something on the list and little or nothing is missed out.
5. What do you want to use the property for?
If it is a holiday home you will probably want easy access and therefore will want the property within reasonable distance of an international airport. If it is a permanent home then other considerations might be more important like views, size and scope to improve. If you are buying as an investment to let, you need to think about the kind of rental, i.e. Long term or holiday as again the area is important for your potential guests. You should also keep in mind that if you are buying a property that needs renovation you should try and factor in the costs for a surveyor, architect and builders etc. think about the period of renovation when there will be no income from the property.
6. Where do you want the property to be?
Now that you have your budget and your list of all the essential requirements, this is the best time to start your research. Your first step is to go on to online and begin searching. Although you can search by town it is much easier at this stage just to search by area and budget as this will give you a much better idea of what you will get for your money. You will see that the closer to the coast of the Costa del Sol, the more expensive the property whether it is a town house, apartment or country house.
7. What legal requirements are necessary for foreigners?
The most important is an NIE number, this is a national identification number and is necessary for most things you will want to do in Spain but essential for buying a house. If you are coming to live permanently in Spain you need to think about transport. Residents of Spain are legally obliged to drive a Spanish registered car with a Spanish driving licence. Although you can import your car from the UK this can be expensive and a RHD car is not the best thing to use on Spanish roads, we think it is far better to sell your car in the UK and buy one in Spain. The Spanish licence is exchanged for your UK licence, there is no test to take. If you are in receipt of a UK state pension you will be eligible for free health care in Spain if not you will need to have private health insurance if you are not paying into the system by working in Spain. Once you have purchased your property you really should make a Spanish Will, whilst you are not governed by the Spanish Laws for disposal of your assets there will be untold problems for your descendants if a Spanish Will is not in place. If you still have interests in the UK you will need an English Will too, with the Wills in each country referring to the other. There are many companies in Spain that will prepare both English and Spanish Wills together and give you them in both languages.
8. Taxes and Insurance?
There will be annual tax to pay on your property in Spain whether you live here permanently or have a holiday home. These charges are MUCH less than in the UK, as an example 50 to 250 euros PA is normal to cover refuse collection and other council provided services. If you live here permanently you are responsible for paying taxes on your world wide assets so you need to ensure that you are not paying in the UK as well. If you own property in Spain Although you are not subject to Spanish Inheritance law if non resident, it makes life easier for your descendants if you have a Spanish will.
9. What else is important?
Find an estate agent you can trust, that will offer many more services than just selling you a house. Beware of advertisements offering you free or low-cost inspection trips, you could pay dearly for them in the end. The Guardia Civil are currently investigating several estate agencies who have been selling illegal properties. They estimate that more than 2000 illegal houses have been built in the last three years. The title deeds often list the land only and the agencies are not informing clients so they may not find out for some time that they are living in an illegal house. Reputable agents double check everything when viewing properties and when talking to lawyers. Always use an English and Spanish speaking lawyer to handle your sale, there are many in Spain and although it may cost more money, it is well worth the small additional cost if only to make all the necessary checks prior to signing a contract at the notary. Please be aware, there is no such thing as a private contract in Spain, this is distinct from the one you use at the start of your official purchase. In order to correctly and legally purchase a property, contracts are signed in front of a public notary. Never accept contracts given to you that have not been checked by a lawyer, many illegal houses are sold that way. Don´t forget that there are also standing charges for utilities and the Spanish Inland Revenue can tax you on the rent "they believe" you would receive if you let the property, add to that your property maintenance, try and budget for all of these along with your other outgoings.
10. Get Title Insurance
In order to have complete security against problems that may occur in the future when buying a property in Spain it is important to receive Comprehensive Title Insurance. This protects the buyer against any losses arising out of title related defects, it is valid for the total time that they own the property. Some examples of covered risks include: claims by third parties such as undisclosed heirs, unrecorded tax liens, errors and omissions in the public registry, alteration or loss of title documentation, fraud, forgery, and clerical or typographical errors affecting ones title, thus affecting their investment or holiday home. Title Insurance can enable you to purchase a property for a permanent home, holiday home or investment with absolute peace of mind, It even includes payment for Legal Fees to defend a claim.
If you use the above 10 points when buying your property, you will be well on your way to realizing your dream of owning a home in Europe’s sunniest location.
Written by : Barbara Brough