Frequently asked questions about buying a property in Spain
Buying property in Spain, don't forget to pay attention!
Buying a house in Spain can be different from buying a house in your country. The tasks of the Spanish notary are rather limited. For example, the notary is not responsible for checking building permits, linked debts, the co-ownership statutes, the registration of your property in the land register, etc.
In addition, you should be well aware of the purchase costs and taxes associated with your Spanish property. Together with our team, we strive for a complete guidance from A to Z. This in full transparency and in your mother tongue.
- Choose your broker
Get guidance from someone with knowledge of the property market and the ins and outs of local legislation. This will undoubtedly save you time and headaches. Thanks to our good relations with developers, you can benefit from many pre-launch offers and more interesting conditions. We guide and advise you from A to Z so that there are no surprises afterwards.
Before you arrive on site, we get to know you better during one of our information sessions, webinars or home visits.
So you know in advance what you are getting into. It is also very important that you are well informed in advance about the financing of your new home. In this way, we avoid disappointments afterwards.
- You have found your dream home, now what?
You will always be accompanied by our team of professionals.
In the case of a new build property, you sign the reservation contract whereby you pay an advance of €3,000 to €6,000. This way, the house is taken out of the sale for you. Afterwards, the private purchase contract follows with the mentioning of legal clauses, the purchase amount, the payment schedule and the detail of your property. You will be guided through this by our professional staff. Given our good relationship with developers, we can often negotiate more interesting payment terms for you. Once the required completion documents are available, the notary can be scheduled.
Depending on the stage of construction, you will be able to make material choices. This differs from developer to developer. We will assist you with this.
In the case of an existing property, you will sign the Contrato de Arras with the selling party. It is usually agreed that you pay 10% of the purchase price and a date is scheduled for the notary where you pay the balance by bank cheque. If you cancel the purchase, you lose your 10%. If the seller renounces, he must refund you your 10% plus 10% as the penalty. You can use our third-party account or that of your solicitor.
We also advise you to engage a lawyer and give him your power of attorney. After all, there are numerous administrative actions to be taken. In your name, this person can then represent you at the police (NIE number), municipality, bank, tax office, utilities, notary, community of co-owners, etc.
- What are the payment conditions for new construction?
When you are convinced about a new home, the reservation contract will be drawn up. This means that you make a small down payment (usually up to €6,000) so you are assured that the house will be taken off the market and will linked to your name. Usually, the private purchase contract will be signed within a month and you will pay 10% of the purchase price (minus the reservation fee). Then, you will pay in phases depending on the construction.
These payments vary around 15% and are paid after the works of that phase have been carried out (demonstrated by means of a certificate of works from the architect). The developer must by law provide a bank guarantee for each payment he receives. This is to protect the buyer.
Then you pay the last payment at the notary. This means that the house and the complex have been fully completed and visited by you.
We have been working closely with developers for years. For that reason, our customers can often obtain a more interesting payment schedule than regular customers.
- What is a NIE number?
Anyone who is not a Spanish resident and wishes to purchase a Spanish house will need to have this number. This way you will end up in a database, linked to a unique number. Without this number, you will not be able to execute the deed at the Notary. Furthermore, you will need this unique (tax) number for connecting utilities, filling in your tax return etc.
- When do I become the owner?
The transfer of ownership takes place when the notarial deed is executed. It is also at this time that you will be handed over the keys to the property.
- Who can I contact with questions after my purchase?
NB-ESTATES is for many customers a trusted local advisor. With us, you can count on a professional follow-up from the beginning to the end of the buying process. But also after your purchase, you can feel free to ask us questions. Usually, these are practical questions such as where to buy furniture, where to buy internet, etc...
- What are the purchase costs?
The taxes vary by autonomous region and are subject to change at any time.
Here is a simulation of a house with a purchase price of € 200.000.
When you buy an off plan house, you will have to pay the following costs:
VAT: 7% or 10%
Duty stamp: 1% to 2%
Notary: +- € 900
Land registry: +- € 500
Connection water / electricity: € 500 including meter
Counsellor (if needed): +- 0.8%
When you buy an existing house, you will have to pay the following costs:
No VAT but ITP (transfer tax): 6.5% to 10%.
No Duty stamp tax
No connection charges for water/electricity
The rest of the costs are the same as for a new build property
Count on an average of 10% purchase costs in Tenerife and 11% to 14% for the other regions. You will always receive in advance a detailed estimate of these costs for your favourite property.
- What are the annual costs?
Annual taxes need to be paid at both the national and municipal levels:
IBI (property tax)
BASURA (rubbish collection)
MODELO 210 (tax as non-resident with property)
You should also take these costs into account:
Community costs (co-ownership)
Water / electricity
Fire and theft insurance
Practical example of a two bedroom penthouse flat of 100 m² located in Tenerife, Granadilla de Abona, on a yearly basis:
Insurance: € 207,60
IBI: € 189,90
BASURA: € 90
MODELO 210: € 106,08
Water: € 156
Electricity: € 480
- What are the Spanish taxes if you are a non-resident owner of Spanish property?
Income tax (modelo 210): this must be filed annually, you will not receive an invitation for this. Unfortunately this can not be done by direct debit payments. We are happy to refer you to professional employees who can take care of this for you.
Property tax: This is a municipal tax and is called IBI. The cadastral value is used as the tax base for levying this tax. The rate is set by the municipality where the property is located. At the time of purchase, we will ensure that you are registered with the competent authority and that this payment is made annually. Waste collection (basura) is also often linked to this tax. This can be done by direct debit payments.
If you rent out: you pay 19% on the net rental income. You may deduct from your gross rental income expenses such as community fees, water, electricity, maintenance, municipal fees and taxes, etc. You are responsible for declaring the tax quarterly: before 20 April, 20, July, 20 October and 20 January. For the periods when you do not rent out the holiday house, the taxable base consists of a percentage of the cadastral value.. This percentage differs per municipality, but is between 1 and 2%. On the cadastral income, you also pay 19%.
Capital tax: this tax is usually called "patrimonio tax". If your Spanish assets exceeds € 700,000 you will have to pay this tax. The national taxes are in force and vary from 0.2% to 2.5%.
- What should I take into account if I want to sell my home?
We recommend that you take one estate agent into confidence. This way you have a single point of contact. In addition, it is best to take into account the taxes you will have to pay when selling.
This is 19 % on the capital gain. You can deduct incurred costs from this amount:
IGIC (VAT paid on new build properties)
ITP (transfer tax paid on existing properties)
Lawyer costs for purchase
Estate agent costs when selling
Costs of notary at purchase
Costs for the registration in the land registry
Major renovation costs (licencia obra major)
Withholding tax for non-residents
If you sell your Spanish property as a non-resident, the notary is obliged to withhold 3% of the selling price to be paid to the tax authorities. This withholding tax is only a down payment on the final profit calculation. The 3% withholding tax deducted by the notary will of course be deducted from the final profit calculation.
By means of a declaration form, the actual calculation of the capital gain is sent to the tax authorities. If it turns out that the withholding tax exceeds the amount paid, a refund is requested.
This is a municipal tax that is paid when a property changes of owner (sale, inheritance, change of usufruct, etc.).
The tax is calculated according to the increase in value of the ground * , also known as valor catastral.
*When a flat is sold or transferred, the land portion (cuota) of this flat is taken as the basis for conversion.
The plus valia will then be calculated on the amount of this increase in value. The maximum period for which this tax is calculated is, in principle, 20 years. To be sure, we need to enquire this at the municipality. In principle, the tax is paid by the seller. This must be done within 30 days of the deed being signed.
- Do I have to declare my Spanish home in my country of residence?
Normally you are obliged to declare your Spanish house (and Spanish bank account) in your personal income tax.
Double taxation agreement
If your country of residence has a double taxation agreement with Spain, it is not possible to pay twice for the some tax.
This way you are not taxed directly on your property twice. But you can end up in a higher bracket. Given that these amounts are small, this is rather unlikely.
- Am I taxed twice on my purchase by my country of residence?
No, but you must declare your worldwide income in your country of residence. You are not taxed directly twice on this, but you can end up in a higher bracket. But this is very exceptional.
- Transfer of ownership takes place at the notary
Once your home is ready to be delivered, a date is scheduled for the deed to be executed at the notary's office. You can use a power of attorney if you cannot be present yourself. This deed will be drawn up in Spanish. Don't worry, we will accompany you on this occasion and the deed will be translated orally by a sworn interpreter.
- Important administrative tasks after the notary?
After you have signed the deed at the notary's office, there are still many essential formalities to be completed. For example, your notarial deed will have to be registered in the property register and you will have to pay the taxes linked to your purchase within the legal deadlines. Furthermore, you will have to make sure that you are registered with the land registry, the community of owners, the electricity company, the water company, etc.
Don't worry, we are specialists in this field and will be happy to help you. We also make sure that everything can be payed by domiciliation is activated, so that you don't have to think about anything.
- What if I lose my deed of purchase?
Don't worry, you always receive a COPIA SIMPLE of the deed. The authentic deed is always kept by the notary. When the notary retires, his files are transferred to another notary office.
- Do I need to draw up a Spanish testament?
This is certainly not an obligation, but it will save your partner and heirs a lot of costs and administrative hassle. Suppose you are permanently resident in Spain, then Spanish inheritance law will apply and your estate will be subject to Spanish rules. With a Spanish Will, you can opt to apply the inheritance law of the country of your nationality.
Why buy from us
- Why work with NB-ESTATES?
NB-ESTATES is a recognised real estate agency. Our long term vision translates itself into a careful and strict selection of real estate possibilities. Thus, we will not include any projects in our portfolio that have not been positively screened in terms of bank guarantee, permits, reliability and level of completion.
Our offer is spread over the most desirable regions. This way we guide you in a neutral way and we can show you what really suits you! Together with our professional staff we make sure that everything is taken care of. This before, during and after your purchase. Our service will undoubtedly save you a lot of time and headaches. In addition, thanks to our long-term relationships, you will enjoy pre-launch possibilities and more interesting payment terms.
- Thorough knowledge of the real estate market and its regions
Our employees live locally and know the region and its special places better than anybody. Without a good estate agent, it is almost impossible to map out the area and its real estate possibilities. We make careful selections based on your wishes, but also look at the reliability and expertise of the builders. Not only do we focus on the properties that may match your needs. We also take time to show you the area: beautiful beaches, trendy beach bars, etc.
- Aftersale service
Also after your purchase, you can come to us for questions and advice. Considered you do not live in Spain, it is nice to know that you have a local confidant. Please read our beautiful testimonials from customers who have gone before you.
Buy as an investment
- Why invest in a Spanish property?
Real estate has a double return: on the one hand, you get income from renting it out, but on the other hand, real estate also has long-term added value, which makes it a risk-free investment. And did you know that the value of property has risen twice as fast as inflation over the past 50 years?
Three more reasons to invest in real estate? You enjoy a cheap loan, because the interest rates for a loan are currently historically low. You also enjoy a tax advantage, because the interest on your loan can be deducted from your cadastral income and so you ultimately pay less tax. In addition, the rental income can cover the monthly repayments of your loan, so that your assets continue to grow.
And ultimately, you benefit from a supplement to your pension. After all, your financial debt will decrease over the years, but the value of your property will be maintained. So once you reach retirement age, the rental income can be a very nice extra on top of your pension.
As with all investments, you must also take the risk into account. And with real estate, you are faced with a very minimal risk that no financial product with a decent return can compete with today.
- What if I rent out my Spanish property?
Renting out this new property can be very interesting. You can rent it out on a short term basis (holiday rental) and at the same time enjoy it yourself.
By renting out, you create a passive income. Apart from the investment and maintenance costs, you can eventually earn money without it costing much time and energy.
Your income grows.
The value of the property can increase, which is an extra profit.
Investments in real estate are stable investments compared to investments in shares. Even if the value of the property falls, it can eventually rise again and you will continue to receive rental income.
Be aware, that the regulations regarding holiday rentals may vary from region to region. Depending on where you are buying, we can put you in touch with reliable service companies so you can rent out your property carefree.
- Rental license?
If you are purchasing as an investment (holiday rental), it is important to know in advance where it is permitted or where not.
Based on your criteria, we will then adjust our selection of properties.
We will further assist you in obtaining this licence.
On the profit from this rental income, you pay 19% tax. You can deduct the costs made to generate this income.
When you rent out your property for periods longer than one month, for example to winter visitors or students, you do not need a licence.
However, you must also declare your rental income outside of holiday rentals.
- Association of Co-Owners
The Comunity of Owners determines the common rules and the costs for the co-owners. Most buyers only ask about the annual costs. However, if you want to rent out, you should also check the rules of the co-ownership. For example, since 6 March 2019, the Comunity of Owners has the ability to restrict or even prohibit holiday rentals. This is only possible with a decision of 3/5 of the (present) quotients.
- How can I finance this property?
By mortgage loan
Your home bank can sometimes lend you money surprisingly easily and very cheaply for your purchase in Spain. The condition is usually that you can offer a guarantee located in your country. This can be your home that is (almost) paid off, but the bank sometimes also take into account other assets such as pension funds or shares. Your bank probably will not give a loan with your Spanish home as collateral. If you have assets in your home country that your bank can consider as collateral, you will probably have lower set-up costs for the loan and a better interest rate than if you would work with a Spanish bank.
Due to the low interest rate, it is currently interesting to finance a holiday home with a mortgage loan.
If you have almost or recently paid off the loan for your first home, you may be eligible for a reinstatement. In that case, you will not have to pay any notary and mortgage fees for the loan for your second home. Of course, you will be borrowing at the current interest rates when you take out the new loan.
- Is my mortgage loan deductible?
If you have enough money, you could choose to pay the purchase price in one go from your savings account. But perhaps financing with a home loan is more interesting for you! This way you can spread the purchase costs, benefit from favourable interest rates and also enjoy tax advantages.
- Can I borrow in Spain for the purchase of this property?
If you cannot offer collateral to your home bank, you may not be able to obtain a loan there. It may certainly be interesting to explore your options with a Spanish bank. Please note that you are not a Spanish resident and that your conditions will therefore be stricter. We can refer you to one of our partners so that you can obtain simulations. In general, you will be able to borrow 60 - 70% of the appraisal value or purchase price. This means that you must have 30 - 40% of your own funds. We recommend that you always have at least 50% of your own funds. In addition, in general, 35% of your net annual income (minus current loans) can be used for this loan.
- Do I need a Spanish bank account number?
SEPA makes it easy to make payments within Europe. Today, it should therefore be possible to do everything with your home account. However, there are still institutions for which this is not yet possible. We will check this for you.
- What is a bank guarantee?
NB-ESTATES only works with recognised promoters who can present a bank guarantee certificate. We request the necessary certificates of payment for you. This makes your purchase safe, throughout the whole process.
- Do I have to insure my Spanish home?
We always recommend insuring your dream home in the best possible way. If, for example, your home is part of an apartment complex, then the entire complex is insured. The owners' association takes out insurance for the entire complex. Each owner pays his or her share, which is deducted from the annual communal contribution.
Check whether the association has taken out insurance that covers all possible risks concerning the complex.
In practice, however, the communal association only has limited cover and usually only insures the communal property.
In case of uncertainty, we recommend also insuring the flat itself.
You remain responsible for the contents insurance. It is best to take out contents insurance together with liability insurance.
Home contents insurance
When contracting an insurance, make sure you know in advance what the insurance covers and what conditions you must fulfil (e.g. turn off the main water tap when you are absent).
The contents insurance covers damage to goods in your home (fire, burst water pipes, etc.).
The insurance is tailored to your personal situation, taking into account the value of your household effects and your living situation, among other things.
This insurance covers you against damage that you cause to third parties (leakage or fire in your flat that causes damage/ nuisance to your neighbours, damage caused by your pet, etc.).
This insurance is only compulsory if you have a mortgage on the house.
This insurance provides cover for damage of a structural nature caused by fire, lightning, storm, etc.
Make sure that the reinstatement value of your house is correct.
Seguro de hogar
This insurance includes home insurance, building insurance and liability insurance.