The first major question on expat’s minds is the following; can foreigners buy property in Spain? The answer is a resounding yes; Spain’s real estate market is full of international buyers that have bought property as either an investment, a vacation home or as a retirement home to enjoy the many benefits of the Iberian peninsula.
Home Ownership in Spain
Home ownership in Spain is very high, with around 80% of residents owning their own property. The COVID-19 pandemic has affected the real estate market, just like in every country around the world; however, prior to the pandemic, international buyers accounted for 18,000-25,000 property sales yearly.
Financing Options
Before you begin to look at properties, it’s important to realistically consider the market and what you are able to purchase. As with the vast majority of real estate markets, there are two main options when purchasing property in Spain:
- Paying upfront: If you have the means to do so, purchasing property with the entire cost upfront allows you to skip the entire mortgage process. In fact, some properties purchased upfront may mean you qualify for a residency visa; owners of property(s) that totals at least €500,000 are eligible for the Golden Visa program.
- Mortgage: If paying the entire cost upfront isn’t feasible, don’t worry. Mortgages are available for foreigners; however, make sure you fully understand the process and fine print before signing any documents. Spanish banks only allow foreigners to borrow at a lower loan-to-value rate than Spanish nationals, meaning your initial deposit will be larger. Depending on the agreement reached with your bank, you may only be able to mortgage 60-70% of the property value.
Things to Consider
There are a few hidden and additional expenses that are essential to know before committing to a property.
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Debts from Previous Owners
In Spain, any property debts from the previous owner are automatically transferred to the new owner upon purchase. Therefore, it is essential to ensure that there are no outstanding debts on the property before signing anything. If there are debts associated with the property, make sure that there is a clause in the purchase agreement that specifies the previous owner will take care of it.
- Additional Costs
Property taxes in Spain vary heavily depending on a few factors. In the region of Valencia, purchase property taxes are 10% of the purchase price. In addition, the price will differ depending on the status of the building: new and existing properties are taxed differently. Properties are also subject to yearly property taxes that are usually between 1-2% of the property value. Finally, there are a number of administrative expenses that come with property sale; notary costs, the title deed tax and the land registration fee can total 1-2.5% of the purchase price.
If you choose to receive assistance from solicitors or real estate agents, be prepared to add more costs to your purchase. Legal fees, depending on the complexity of the situation and if there are additional applications included, such as immigration paperwork, can cost an extra 1-2%. In Spain, the sellers usually pay real estate agent fees (around 3%), but there are some agencies that charge the buyer. Research fees beforehand to avoid any unwanted surprises.
Lastly, remember that in Spain, all residential properties are legally obligated to have home insurance that covers the entire cost of the property.
- Letting Rules
If you are planning on buying the property for letting purposes, it’s absolutely essential to check the rules of the community before purchasing. In some regions of Spain, only Spanish nationals are allowed to buy-to-let and in others, there is a time limit on letting.
How to Apply for a Mortgage in Spain
If you’ve decided that buying an apartment in Calpe is the right choice for you, here’s a quick overview of the steps you will need to take.
- Find a property: we highly recommend being in Spain yourself to see properties in person before buying, but if that isn’t possible, find a trusted real estate agent to view properties for you. In addition, you must obtain a Foreigner Identity Card (NIE) before applying for a mortgage. This can be done from outside Spain, but is much easier if you’re already in Spain.
- Apply for your NIE: take the following documents to your local police station to apply for the NIE:
- Two passport photos
- Copy of passport
- Documents that prove the need for the NIE
- 790 bank form (to be paid previously at any bank)
- Complete EX-15 form
- Apply for a mortgage: the majority of banks in Spain offer mortgages to foreigners, so take your time and consult a few different ones to find the best fit for you. Once you have found the right bank, you will need the following documents to apply for the mortgage:
- NIE number
- Proof of income/employment
- Property agreement with seller (called arras)
- Proof that the property is up-to-date with property taxes
- Details of any existing debts and mortgages
- Recent bank statements that show your current assets, both in and out of Spain
We know that this process can seem long and impossible, so don’t hesitate to contact us to resolve any doubts and get started on the process of buying property in Calpe.