If you’re looking to buy a holiday home in Spain, or perhaps a place to retire in the sun, it’s worth considering all the costs as well as the benefits.
The appeal for holidaymakers is clear; for many, having their own home can be a retreat from the hustle and bustle of daily life. Spain is a popular spot with tourists and as a result there are many resorts and golf clubs which can add to the appeal of owning a property in a place with so many reasons to return again and again. The temperate climate, sunshine and slower pace of life attract pensioners to Spain.
Coupled with these factors is the fact that property can be more affordable than in the UK and a lower cost of living mean that it’s possible to enjoy a higher quality of life on a small budget if you’re planning on emigrating to Spain.
How to start the process
Before you start looking at houses in Spain, it can help to clarify exactly what your requirements are. Most estate agents work regionally, so you will need to think about what you want from your holiday home in Spain or what may be important if you plan to retire there, so you can pinpoint the right region.
One key consideration is whether you plan to immerse yourself fully in local culture or whether you prefer to have the amenities and familiarity of a tourist destination or an area popular with expats. It’s not an either/or choice – you can find places where a holiday home in Spain gives you access to tourist destinations and authentic Spanish culture, or within easy reach of an expat community for advice and support.
Once you’re clear on what you want, check out the prices in your chosen area, decide a budget and book a scouting trip to view potential options for your new home in Spain. Book your visits in advance, allow time to reflect on each viewing and keep your own checklist so you don’t get dazzled by the possibilities and forget any of your requirements. Keeping notes will also help you separate the different properties, which may merge in your imagination after a few different visits.
Getting a mortgage
If you need to borrow to buy a house in Spain, you can either speak with a UK lender or you can take out a mortgage in Spain.
Spanish mortgage lenders offer an array of mortgage products specifically designed for foreign and expat investors; it’s worth shopping around to find the one that will work best for you. It’s worth knowing that non-residential borrowers are usually only allowed to borrow 60-70% of the property’s value, compared with up to 80% for residents.
Getting a mortgage in Spain requires a Número de Identificación de Extranjeros (NIE) – an ‘identification number for foreigners’. This is similar to a National Insurance number and can be obtained through applying at your local Spanish police station or via the Spanish consulate in the UK.
Your application requires you provide a completed EX-15 form, your passport and supporting documents to show why the NIE is required. In addition, you’ll need to pay a fee of €9-12 to submit tax form 790 and provide two passport-sized photos.
Once you have the NIE number, there is additional paperwork you’ll need to apply for a mortgage in Spain. The full list will depend on your circumstances but the essentials include:
- Proof of employment or income, such as income from a UK pension
- An outline of any outstanding debts, current mortgages
- Copies of all your existing property deeds and records showing your current assets
- Proof that the property tax is paid to date and a pre-agreement with the seller
Along with the cost of the property itself, there are additional costs to consider with houses in Spain. Before you buy, you may need one or two scouting trips – or possibly more if you’re supervising renovations before you move in.
Legal fees, local taxes and property maintenance must all be taken into account – and all of these will need to be paid in currency. This can be an additional cost as, if you have a holiday home in Spain, you may find that if you pay the costs from your high street bank account, you’re incurring transfer fees of up to £40 per transaction. Even in the initial stages of buying a property in Spain, these costs can all add up.
If you’re making a permanent move and have set up a currency account, transferring your pension from your UK bank account may still incur these fees. In addition, fluctuations within the foreign exchange market can put your currency at risk. A sudden drop in the market may find you priced out of your dream property, and equally, if the pound makes gains, you might find that you’re transferring more than you need to and may prefer to keep those savings for a nest egg at home.
Additional fees when buying property in Spain
Transaction costs can add up to 10-15% of the property value and this needs to be factored into your budget.
There are various Spanish taxes to pay on a residential property. Depending on the location of your new home in Spain, the transfer tax can be 6-10% of the purchase price. Stamp duty is also linked to the location at 0.75 – 1.5%. In some cases, you may also be liable for the seller’s plusvalia tax and the requirements are linked to how long the seller has owned the property.
Tax isn’t the only cost to consider; you’ll also need to take out home insurance as a legal requirement. Life insurance isn’t mandatory for property ownership but may be required by some mortgage lenders.
Don’t forget to add in all the currency costs when you’re making your budget. Fluctuations within the foreign exchange market and transfer fees can have an impact on the overall cost of your property purchase. A specialist like Moneycorp can offer you great rates and tools to manage your money overseas and help you to make the most of your money when converting GBP to EUR.
Open your account today and take a step closer to achieving your dream of buying a property in Spain.