Making the decision
Having decided that Spain is the ideal location for your retirement, new business enterprise or base for your new life, you will decide on a budget for your property. You should add between 10% and 11% to cover legal costs, Notary expenses, Land Registry fees, Stamp Duty, VAT (IVA) for new properties only and mortgage arrangement fees (if applicable). The currency fluctuations between the euro and the pound sterling should be considered to ensure that you remain within budget.
Registration documents
Once you have found the property of your dreams, you now need to source the finance unless you are lucky enough to have the cash in hand. Before opening a bank account you will need your ‘Número Identidad de Extranjero’ (NIE) number which is a foreigner’s identification number. This is obtainable from the local police station (Comisaría de Policia) and is fundamental to life in Spain. The relevant form is available from the police station, your passport and a copy of your passport. The NIE number is required for you to be able to open your bank account and pay the taxes on your property purchase. You will also need to find a reputable legal advisor or asesoria/gestor (conveyancer). The latter can help you in many ways, including obtaining the NIE number, ensuring that the title deeds are correct, organising the transfer into your name and later helping with filing your Spanish tax returns and making your Spanish will. Prior to completion he/she will carry out searches and obtain a Nota Simple, an extract from the Land Registry which confirms that the seller is the registered owner of the property and that all taxes have been paid.
Finding the finance
Spanish banks are the best source of finance, and, as in the UK, interest rates will vary. The loan to value (LTV) rate you will be able to raise will vary between financial institutions but most will lend between 60 and 70% of the value of the property, depending on the type of land on which the property stands. Urban land (in a town) attracts a higher percentage loan. You will need to pay for a bank valuer to survey the property. The purchase price will also be taken into consideration when deciding the amount of the loan. If the purchase price is lower than the valuation, the bank will make the offer on the purchase price, not on the valuation.
Despite Spain being in the European Union, it is expensive to raise finance in the UK to pay for a Spanish property, given the current exchange rate against the euro although it is possible. If you do decide to raise a mortgage in Spain, it is recommended that you do not pay the deposit until it has been agreed, as the deposit is non-refundable unless you are lucky enough for the owner to agree that it should be written into the purchase contract.
Final note…
You should be entirely sure that you can afford to purchase your property in the sun before taking the final steps. Many people in the 1980s mortgaged their family homes in the UK to raise the money to finance their dream and lost not only their UK property but the Spanish home as well as they could not maintain the payments.
Tina Irving
http://www.tinasfreelance.com