Property tax varies from region to region and the tax is different when buying a second-hand property compared with a new-build. For second-hand properties the tax is referred to as ITP whereas for new-builds it is called IVA.
These taxes are usually somewhere between 8% and 10% of the property price.
Some regions have fixed percentages no matter what the price is, whereas others have tax bands.
We can advise on this when we find your property.
Good to know…
The costs of purchasing property in Spain with a mortgage can vary considerably depending on the price of the property, the region in which the property is located, the advisers appointed (lawyers, brokers, agents, etc.) and the deal agreed with the vendor or estate agent.
Having said that, estimating costs of 12-14% of the purchase price is currently a good guide.
Some banks have minimum opening fees and lawyers, brokers and valuation companies also have minimum fees. This means that for cheaper properties, the costs as a percentage of the property price can be significantly higher than 13%.
Always check whether the selling agent has included their commission in the purchase price. Some agents do this and do not charge the purchaser directly. Others do not, so you need to check this out before assessing the overall costs involved.
Can I get a mortgage in Spain?
The good answer is yes you can!
Spanish banks will finance the purchase of a property in Spain along clearly defined criteria, as follows:
Your debt ratio may not exceed 30% to 40% of your net income.
That means that the total of the repayment amount of the mortgage PLUS the amount of any other loans you already have in your country of origin cannot exceed 30% to 40% of your regular monthly income.
The mortgage amount cannot exceed 70% of the sum between the appraisal value of the property and its purchase price, whichever is the lower!
A rule of thumb is that the age of the youngest person (in a couple), when added to the length of the mortgage cannot exceed 75 years.
All banks offer mortgages and you will need 20% of the purchase prices deposited into the account before further funds are released.
We strongly suggest using a mortgage broker – they routinely work with the major lenders and can bring a selection of mortgage offers to the table. It saves a lot of confusion, time and money. The brokers naturally charges a fee for this service but this is transparent.
Domy Hiszpanii recommend using Mortgages Direct – they’re one of our trusted partners, have been in business since 2006 and have an impeccable reputation for customer service & satisfaction.
Just so you are aware, Domy Hiszpanii do receive a small “finders fee” for referring clients but even if we didn’t, we’d still recommend their services!
Annual Expenses – what are they and how much should I expect to pay?
Generally it’s not that expensive to run your home here in Spain.
As well as your general maintenance expenses, such as water and electricity, the annual taxes and other expenses depend on the size and type of the property. Below are the usual expenses you can expect;
IBI (Property Tax)
This is a local council tax on the property regardless of who the owner is. It’s calculated by the “Assessed” value, which is an administration value & normally lower than the market price & is often much lower. Your local council then applies a % charge on this value.
Generally speaking this is from €150 to €400 a year.
IRPF (Income Tax)
If this is your main residence it will be exempt from income tax. If it’s a second or holiday home it will be liable for “Property Income Tax” on your Income Tax statement.
This is calculated as 1.1% of the Cadastral Value if this has been revised, 2% if it has not been revised or 1.1% of 50% of the purchase price if a cadastral value has yet to be been assigned to the property.
The result of this calculation will then be applied to the general tax rate corresponding to each taxpayer.
For example, if a property has a Cadastral Value of €100,000 the tax will be calculated as follows:
Income Tax (IRPF):
Tax base=1.1% of the cadastral value (100,000 euros) = 1,100 euros.
The amount of the tax will be the result of applying your tax rate to this amount. So if you pay tax at 20% the income tax will be €220 a year.
If your property forms part of a complex, a residential development or building in which there are common areas, then each owner must, by law, be a member of the Homeowners’ Association.
An annual budget of the common maintenance expenses will be approved at a General Meeting of the homeowners’ association. Each owner pays a service charge, which is usually between €45 and €120 a month.
The amount depends on the number of owners of a complex, the type of common facilities in the complex, such as a swimming pool, lifts or Spa and usually the size of the property within the community.
Whilst the annual meetings are fairly informal this is where community issues are voted on. There are specialist administration companies that deal with all aspects of the community management.
Naturally home insurance depends on the features of the building and its facilities. It can range between €150 and €400 a year, for an average property type.
We can refer you to reputable and long established Insurance Agents if you require.
Tax – how much will I pay?
The main TAX on New Build Property is IVA (Spain’s VAT or sales tax.) This is currently 10% and is paid directly to the developer on each payment. As the usual rate of IVA is currently 21% the Spanish Government has no doubt set that rate in order get keep the property market moving.
Then there is a second tax called AJD (Stamp Duty) which is payable when you sign the deed of sale at the Public Notary and is currently 1.5% of the property’s declared value (in the Valencian Region).
Then you have to pay the Public Notary, the Registrar and Lawyer’s fees, A good rule of thumb is to allow an extra 14% on top of the net purchase price work out the total cost of the property purchase.
NIE – what’s that all about?
The NIE (Foreigner Identity Number 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.
It’s is purely administrative in nature and does not mean that you have any rights to live in Spain! It never changes but the Police may request a recently issued copy when you buy or sell a property.
To get your NIE you’ll have to go to a National Police office, usually dependent on where your proposed property purchase is located. You’ll need to take your passport, photocopies of documents and up to date passport sized photographs and with the appropriate form having been completed.
Quite often this entire process is complicated due to the high demand of people seeking NIEs in popular areas and the different requirements of the NIE offices.
Your lawyer will take care of this for you and we suggest that you let them, or talk to us and we can advise on reputable companies that provide these services on your behalf. There will be a charge for this of course but from as someone who’s been through the process it’s money well spent!
It will save you hours & hours and hours…
You can get your NIE number whilst in your home country through the Spanish Embassies, but this may well take longer to process.
What’s a Public Notary?
Public Notaries are like special but independent civil servants who provide several functions for the government. For real estate they provide people with the legal security guaranteed in Article 9 of the Spanish Constitution within the context of extrajudicial legal matters. They are also independent legal professionals who run their own businesses.
This dual status guarantees their independence. A Public Notary is authorized to authenticate public acts carried out in their presence and draft documents, such as wills, contracts, inheritances, deeds of sale, etc.
Public Notaries are highly qualified, impartial professionals who help and advise you and they guarantee that your contract complies with the strict property regulations , ultimately providing legitimacy and security for both private individuals and for the Government.
The property sale contract can only be registered in the Property Register through a Public Deed signed and certified in front of a Public Notary.
Do I need a lawyer?
It’s not compulsory to use a lawyer but it’s highly recommended!
Whilst the red tape in Spain is getting better it’s famous for being confusing and for those non-Spanish residents who speak little Spanish , it really is essential to ensure your purchase goes smoothly.
We can recommend good independent lawyers (who speak your language) and competent legal & tax advice will help you to make the best financial decisions. There are matters such as ownership of the property, the tax system, the forms to be submitted, capital gains when you come to sell, future inheritances or donations, property taxation, annual payments etc.
For non-Spanish residents they will act on their behalf, advise them and undertake the extra paperwork involved in purchasing a property in Spain – for example obtaining a NIE (national ID for foreigners) number and tax obligations for non-residents, help opening bank accounts and all the legal necessities when moving to a foreign country.
Is it safe to buy a property in Spain?
We’ve all heard the horror stories about buyers paying large deposits and ending up with a generator in a field! Well that’ s all well and truly a thing of the past.
Spain has introduced extensive consumer protection legislation and within the real estate sector buyer’s rights are guaranteed. That means deposits paid through the banks for construction projects are safe, with construction companies now having to have insurance policies that cover these payments.
If you use a professional agency like Domy Hiszpanii and follow their advice then purchasing a new build property in Spain is 100% safe.
Domy Hiszpanii or any other reputable agency will always recommend using an independent lawyer to check everything on your behalf and remember that 1000s of people from all over the world successfully buy property each year along the Costa Blanca & Costa Calida.
Why should I use a real estate agency?
Well strictly speaking you don’t need to use one! You can go directly to construction sites, introduce yourself and go from there. However…
Naturally we suggest you use a reputable agency to assist your property purchase. Domy Hiszpanii offer our services for FREE to you, the buyer. That’s not completely altruistic of course, we get a commission from the builder on each sale which differs from builder to builder.
What it does mean is that we are able to recommend the best construction companies and give you independent advice on each of them. We have the local & area knowledge as well as personal relationships with each construction company. We only suggest those we KNOW are reputable, that use the best materials and finish to a high standard.
In the end we’ll save you time and money by being able to provide a portfolio of property for you to view before you arrive and prevent you from maybe choosing a builder who’s focus is solely on profit, rather than reputation and customer satisfaction – and that doesn’t cost you an extra penny!
Can you get a better deal by going direct? You can try but it’s very doubtful – not even we can negotiate on the asking price for new build properties – the price is the price and it’s set by the market!
However Domy Hiszpanii sometimes we run promotions on certain developments – so keep an eye out for those…