BUYING A HOME IN SPAIN

Everything you need to know

Buyer’s Guide

Buying a Home in Spain

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03 Some Facts04 The Purchase Process: 8 steps05 Check your financing options06 Choosing the right area07 Choosing an Estate Agent08 Dates & Duration of your visit09 Viewing Trip10 Legal check-up and Bank account11 Signing private contracts12 Public Deeds & keys13 People involved in your purchase14 The Real Estate Agent15 The Solicitor16 The Notary17 Other things that you need to know18 What is the N.I.E.?19 Is it possible to get a mortage loan in Spain?20 The Spanish tax system for foreigners (I) and (II)22 7 Reasons for buying in Spain now

In 2013, there was a yearly increase of 13% in property sales to people from other countries. 28% of them bought in the Costa Blanca (3,786 houses)

When the global credit crunch affected the property market in Spain there was a substantial reduction in prices and property sales. Since then, and at more realistic prices, thousands of citizens from other countries have decided that it is a good moment to buy the house they always wanted in sunny Spain. Sales have doubled from 2009.

Some Facts

The Purchase Process: 8 StepsBuying a property in Spain may seem complicated to a foreigner, but it really is not. In this guide we offer a series of straightforward explanations about the steps you should follow, and the importance of each of these in order to finish the entire process in a satisfactory manner.

1. FINANCE 2. AREA 3. ESTATE AGENT 4. DATES

5. VIEWING TRIP 6. LEGAL 7. CONTRACT 8. COMPLETION

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1. Check your Financing Options

It's really important that you should be aware of your budget and financial options. Wasting your time and money in the search for a property that you then cannot pay for is an exercise in pure frustration.

If you feel that external financing is going to be required, you should visit your bank to consider the different possibilities, like releasing equity from your property in your country.

You can obtain a mortgage loan in Spain, provided that you meet a series of requirements relating to income and solvency. We do not recommend that you request loans for more than 50% of the property’s value, as, in our experience, these are normally not

approved.

Don’t forget to check your financing options prior to your trip to Spain.

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2. Choosing the right area

Depending on your preferences, you have to choose the coastal or inland region that most interests you.

You should bear in mind the climate, the landscape, cultural conditions, and how easy it is to travel to and from the area.

Consider factors such as available services (hospitals, entertainment, supermarkets, etc.), the quality of the beaches, whether you like hot temperatures or not, the seasons of the year during which you intend to spend time in Spain, and of course, the frequency and cost of flights.

Medland Spain is based in the Costa Blanca (Alicante), which over the last few years has become the leading area for the sale of properties to foreigners, due to its beaches, services and property prices.

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3. Choosing an Estate Agent

Although not strictly necessary, it is highly recommendable, however, that you go to an estate agent that can help you choose your ideal property.

A good agency shall recommend the best construction companies and shall provide you with independent advice about each of these.

Employ the services of a well-established estate agency in the country, which will help ensure that the entire process is carried out without hiccups. That way you’ll save time, and ultimately money, as the estate agency shall make a prior selection of products

worth visiting based on your requirements, ruling out those products that fail to meet suitable quality standards or where the financial solvency of the constructor is in doubt.

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4. Dates & Duration of your visit

You can establish dates for visiting Spain in conjunction with our agency.

The ideal length of a visit is 3 to 4 days, depending on the availability of flights, of course. And these should preferably be weekdays, as this will allow you to have guaranteed access to all of the property developments, bank branches, and lawyers’ offices.

If you plan your visit well, you won’t need a longer visit. Shorter stays are also possible, provided that you have a very clear idea of what you want, or if you have already visited the zone.

You should avoid, as far as possible, visits during local festivals, which could make it difficult to access certain property developments. In our agency we will gladly give you advice in this regard.

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5. Viewing Trip

If you organise your visit with an estate agency like Medland Spain, we shall pick you up at the airport to take you to your hotel, where you can drop off your luggage.

Your itinerary shall be planned depending on the arrival time of your flight, with visits to properties either commencing the very same day or the day after your arrival.

A well-planned trip saves you a lot of time, as the route and the order in which the real estate products are visited shall be optimised, making sure that time is not wasted or that you

drive unnecessary distances. Your rest times also have to be well organised.

If you like a product well enough to want to buy it, our agency shall assist you with the subsequent steps.

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6. Legal check-up and Bank account

You should you go through the process of opening a bank account in Spain only if a product really interests you. Any bank will do, although it’s a good idea to choose a branch where they speak a language that you can understand without problems.

At Medland Spain, we always recommend that you contract the services of an independent lawyer to oversee the entire legal process.

Provided that you have enough time, you should arrange a meeting in a lawyer’s office where they speak your language. If you have enough time

during your stay you can also obtain a National ID for Foreigners (NIE), which you will need in order to finalise the purchase, although you can always obtain this ID number during a later visit.

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7. Signing private contracts

If you decide to buy, you shall have to pay a sum as a downpayment to reserve the property (normally 5000 euros) and sign a private sale and purchase agreement.

This agreement establishes the obligations and rights of the buyer and the seller, and normally remains in force until the keys to the property are handed over, at which time the Deed of Conveyance is signed.

Most such agreements are standard in nature and do not vary greatly in content, as Spanish law establishes a series of exhaustive regulations

governing all of the aspects of the purchase.

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8. Public Deeds & Keys

The Deed of Conveyance shall be signed before a Notary Public, which means that the document can be then registered in the Property Register, which is a fundamental step to assure that the purchase has security rights which are enforceable in relation to third parties. Given that the deed is an official document, a Spanish-language version of the document has to be signed, and that is why you really need a lawyer who can provide you with good advice and translate for you.

Normally, when the Deed of Conveyance is signed the keys to the property are handed over to the buyer,

from which time you will be considered to be the owner of the full legal and beneficial title of the property and shall be subject to all the related rights and obligations. That’s when you can really start to enjoy your new home.

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People involved in your purchase

In this section we will try to explain the role of the different professionals or companies that might participate at some stage or another in the process of buying your property in Spain.

1. Estate Agent

2. Solicitor

3. Notary

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1. The Real Estate Agent

The mission of every international real estate agent is to help people from different countries to find their ideal home in Spain. A good agent can provide an invaluable service, in terms of the selection of the products, their presentation, assistance and guidance before the trip, accompanied visits to the relevant properties, and the after-sales service.

The aim of every agent should be that the buying process becomes a professional, pleasant and well-organised experience, by offering the best possible service and avoiding any type of pressure, all with the maximum legal and financial guarantees.

If you find a property that you like, your

agent will assist you throughout the entire buying process, assisting with negotiations with the property developer or builder, helping you coordinate with lawyers, offering you solid advice about best options, and helping you to open a bank account or any other administrative proceedings that may be required.

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2. The Solicitor

When purchasing a property in Spain you do not obligatorily require the services of a lawyer or legal representative, as is the case in many other countries. However, it is highly recommended, especially for foreign citizens, that you receive the assistance of a Spanish lawyer.

Using the services of a Spanish lawyer who is fluent in our language effectively guarantees that the process shall be completed correctly. Moreover, the lawyer shall help you comprehend the entire buying process, and, as such, you can always take the best decisions.

It is highly advisable that you contract the services of a lawyer both to provide you with advice regarding the

purchase, and also to help you obtain the obligatory national ID number for foreigners (NIE) needed for the later steps in the buying process, or even to help you with the payment of your yearly tax obligations.

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3. The Notary

The Notary Public is basically a lawyer who performs the role of a public officer, whose services provide legal security for private citizens. The functions performed by Notaries Public and their appointment is regulated by the Public Authorities, but they are independent professionals who operate in the free market, the upshot of which is that we can choose the Notary Public that we wish.

A Notary Public is an expert in law and can provide us with legal advice, especially with respect to wills and bequests. However, during the conveyance of properties the Notary Public remains neutral and does not represent any of the parties involved, which means that it is a good idea to employ the services of a lawyer who

can provide you with sound legal advice to defend your interests.The participation of a Notary Public makes an act “official” and testifies to the presumed veracity of the documents. A sales contract is only recorded in the Property Register once it has been signed and notarised by a Notary Public. Powers of attorney, wills and many other documents that require official recognition all have to notarised by a Notary Public.

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Other things that you need to know

Mortgage loans, taxes, administrative authorizations, basic information to help you to understand the procedures and obligations when you buy a house in Spain

What is the N.I.E.?

The NIE (“Número de Identidad de Extranjeros” in Spanish) is a National ID number for foreigners, issued by the Ministry of the Interior, and managed from the National Police Force’s immigration offices. The NIE number is purely administrative in nature, and does not imply that you has been authorised to reside in Spain. This number never changes, however, it is possible that the Police shall request a recently issued copy when you buy or sell a property.

In order to obtain a NIE you have to go to the National Police. You shall have to go to a specific office, depending on the municipality where the property that you intend to buy (or sell) is located, with your passport, photocopies of documents and recent passport

photographs, and with the appropriate form having been completed.

Often this process becomes complicated due to the intense demand of people seeking NIEs in certain Spanish regions, and their different requirements. That is why we recommend that you allow your lawyers in Spain to take care of the process for obtaining a NIE for you. It may cost you a little more, but, ultimately, you’ll avoid hours of waiting and dealing with red tape.

You can also obtain your NIE number outside Spain through the consulates of the Spanish Foreign Office; although in this case, it may take longer to process your application.

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Is it possible to get a mortgage loan in Spain?

It is true that the amount of credit granted by Spanish banks has seen a drastic fall off over the last few years, as a result of the adjustment process that the banking entities have had to undergo. Nevertheless, it is equally true that loans can always be secured for solvent clients. Bank’s are all about money lending, and practically all of the entities will agree to a mortgage loan for foreign customers who meet the following requirements:

Their net income has to be at least three times the sum of all of their loan repayments.

The requested sum cannot be greater than 50 to 60% of the value of the dwelling.

A “clean” credit report for customers in their own country.

The age of the youngest party (in a couple), when added to the term of the mortgage, cannot exceed 75 years.

What interest rate shall I be asked to pay? Over the last few years, the price of mortgages has risen due to a lack of international credit. Typically, we find interest rates of 4 to 5%, which are normally fixed-interest for the first year, with the rate then reviewed on the basis of fluctuations in the EURIBOR index.

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The Spanish tax system for foreigners: Taxes during the purchase

We recommend that you count on the services of a lawyers office or have tax advisors to hand who can help you comply with your obligations.

Tax payable during the purchase: Here we have to make a highly significant distinction, depending on whether you intend to purchase a newly built property (first conveyance) or a used property.

◦If you purchase a new property you shall have to pay VAT (Value Added Tax), currently established at 10%, and this applies to each payment that you make to the property developer-builder. There is also a second tax called AJD (Stamp duty) which is payable when you sign the sales deed in the presence

of a Notary Public and which currently represents 1.5% of the property´s declared value. This sum may be less if the property is going to be used as the habitual place of residence of the buyers.

◦If you buy a used property you shall be required to pay ITP (Property Transfer Tax), currently established at 10% for the Valencia Region. You have a period of one month to pay this tax from the date of signing of the deed of sale.

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The Spanish tax system for foreigners (2): Yearly taxes

Here there are two main types of tax payable, in addition to lesser taxes such as that for Waste Collection. These are the IBI (property tax) and Non-Residents Income Tax:

◦IBI (Property tax) is a municipal tax, payable each year, which is calculated on the basis of the assessed value of the property. The assessed value is the value determined by the Town Council, which depends on the type of property, its location and the constructed metres of the property. Generally speaking, the sum involved here ranges from 150 to 400 euros.

◦Non-Residents Income Tax is payable by those individuals that own a property in Spain yet do not officially

reside in the country on a permanent basis; that is, they pay their taxes in another country. The property that they own cannot be consider to be their “habitual dwelling”, and as such, they have to pay this tax, which is calculated as follows:

Calculation formula: 24.75% (fixed rate for the tax) x Assessed Value x 2% (1.1 % if the assessed value has recently increased)

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7 Reasons for buying in Spain now

1. Attractive prices: Prices have dropped around 40% on average and in some areas up to 70%.

2. Positive economic data: Economists are now pointing to signs that Spain's economy is on the road to recovery (stock market gains, unemployment dropping and government tax revenue increasing)

3. Banks lending again: It is becoming easier to obtain a mortgage in Spain as banks regain their willingness to lend to consumers.

4. Rental yields: Annual rental yields are currently at an average of 4.7% and are rising. Many investors are starting to look at buy-to-let as a better investment than other financial

products.

5. Cheaper to buy than rent: At the moment the average monthly payment of interest is less than the average monthly cost of renting.

6. Entry of investment funds: This provides a sign of confidence returning to the Spanish real estate sector.

7. Benefits of ownership: Many people still see property ownership as preferable to renting. Buying a property is an investment in a saleable asset whereas rental is not and many see greater security in ownership for themselves and their family.

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