When you see a property you wish to buy it is usual to pay a deposit of 3,000 Euros (£2,200 approx.) which secures the price of the property, giving you the chance to receive contract details and review before making a full legal commitment to buy.
Your Purchase Contract and 1st Stage Payment
Usually one month after placing your initial deposit you will be expected to pay the first stage payment and sign the contract. This first stage payment varies but is usually between 25% and 50% of the total property value. Once you have signed this Contract you are legally bound to buy the property.
Subsequent Stage Payments
You will agree the amounts and timings of your further stage payments before signing your contract. Typically the final 50%-60% payment on completion of the property. The stage payment terms can vary between developers.
When the property is completed you will need to pay all the outstanding monies, taxes and legal fees. After signing, your lawyer will pay the tax and lodge the Deed, although it may take a little while for the Land Registry to formally register title. You will now own your property and will receive the keys and you can start enjoying your new lifestyle.
In Spain you should allow a minimum of 12% of the property purchase price to cover all fees and charges involved in the process through to completion. This includes:
- IVA – tax is 10% of the declared value
- Stamp Duty – 1% of the declared value
- Notary Fees – 0.5% of the declared value
- Solicitors Costs – Registration and Conveyancing
Some buyers prefer UK mortgages for reasons of peace of mind, familiarity or because they have a good relationship with their particular bank. It is fairly common to borrow money against your UK property to raise equity either for the deposit or to pay the full amount. At the time of writing the UK interest rates are towards the lower end of their range over the last 20 years making lending inexpensive. Obviously rates can change, so it is a good practice to allow some room for maneuver in case rates start to move upwards.
The benefit of having a Euro Mortgage was historically the Banks offered lower interest rates than in the UK. Euro interest rates are currently 4.5% as at February 2015 fixed for one year, then variable. Subject to status, Mortgages are available. Generally new mortgages can be granted for up to 60% LTV of the property valuation.
The documents you typically require when applying for a mortgage are:
- Income Tax Returns (Form P60)
- Proof of Earnings (last 3 payslips/Pension Statement)
- 3 months Bank Statements
- Copy of Passport
- Copy of Purchase Contract
- Proof of address
- Credit Report (Equifax or Experian)
- Latest Tax Return/IR Tax Calculation
- P & L Account + Balance Sheet
- Following year Profit Projections provided by your Accountant
As a Banco Sabadell Intermediary, we are able to provide you with Mortgage Illustrations en request. Please contact us and we will be happy to provide access to all the appropriate information for your review and comparison.
If you are buying a house in Spain you will need to open a Spanish Bank account. In order to do this you will need to provide your passport. It is advisable to open your Spanish Bank account as soon as practically possible (and we are able to assist you with this process) as it is a legal requirement to have a Spanish Bank Account in order to complete on your property purchase in Spain.
Choosing a Solicitor
Your solicitor or legal representative should act for you first and foremost. Choosing a locally based solicitor is normally safer because they are close to the development, know the country and its laws extremely well, and have a good local knowledge. You should request a solicitor who can speak good English and it is better still to find someone who is used to dealing with UK clients as they will be sensitive to any cultural differences with the British methods of working.
Recommendation from friends or your independent property adviser is often the best way to find the right representative. It is not usually advisable to deal with a UK solicitor who has no previous experience of overseas property transactions, as this can give rise to complications over the language and laws of the country concerned. This may also slow things down as they could be trying to learn the process as they go along.
Your solicitor will help to arrange your NIE number in Spain known as Numero de Identidad de Extranjero (Foreign Identification Number) required by all non-residents when purchasing in Spain and is required for all official dealings. After you have completed on your property your solicitor will become your fiscal representative and will look after all your tax needs whether you are a resident or non-resident of the country in which you have purchased.