Posted on 29 June 2018
Whether you are looking for a budget property below 100K, or leaning towards a high end villa costing over 500,000K buying in Spain, or indeed in any other country, it is nothing short of a huge decision, and therefore not an issue to take lightly.
Before taking any steps towards buying a property, it is vital you work out your finances. You must decide how much money do you intend to spend, and where will it come from. Will it involve either selling or re-mortgaging your UK property or are you selling other assets to raise the necessary amount?
When purchasing any kind of property, it’s crucial to consider all the costs involved in addition to the purchase price. If you do not have a firm grasp on how much money you have available, as well as knowing at which stage of the buying process the funds need to be released, it’s possible you might get attached to a property that realistically you are not financially in a position to buy.
Therefore making a financial plan is perhaps the most important step on the path to buying your dream Spanish home without unexpected problems.
Determine Your Budget
Once you have worked out exactly how much you have to spend on your new home, you can eliminate any properties you will not be able to afford. This lessens the chance of becoming emotionally attached to a home you can’t realistically afford. To determine the average price of properties visit private agency sites like http://www.javea.properties.
Make a note of the following important financial points:
- How much money you actually have available to in hard cash to use towards the purchase.
- Find out how much of a deposit you will need to pay, and work out the monthly payments if you need a mortgage.
- Decide whether you will re-mortgage your UK home to release equity.
- Add up all fees and taxes you as the buyer are liable to pay.
- Determine the maximum price you can pay for the property, fees and taxes included.
- Add up the overall cost of maintaining the property per annum.
- Estimate how much it will cost you to spend time in your new home if you are not moving permanently.
There are further costs apart from the purchase price involved with purchasing a property in Spain. These costs depend on a few different factors:
- Whether the property is a new build or a resale
- The purchase price of the home
- Whether you are buying the property with a mortgage
As a rule of the thumb, allow approximately 10% to 12% of the total purchase price to cover all necessary fees and taxes. So if you are buying a house for 150,000€ budget for an extra 16,000€ for fees.
The fees and taxes incurred when buying include the following:
- Transferring tax for a resale home
- ITP – Levied at 8% across Spain, will need to be paid. (ITP is levied at 10% in the Costa Blanca region, with the exception of Murcia)
- Notary fees- approximately 400€ to 900€
- Land Registry fees – roughly half of the cost of the notary fees
- Fees for independent lawyers, usually between 1,000€ and 2,000€
- If you are buying a property with a mortgage, you will be charged valuation fees of approximately 350€
- Stamp duty – approx. 1.5% of the mortgage deeds, and a lender’s commission, which generally around 1% of the capital loans
- If the property is a new build, you will need to pay VAT of 10% rather than an ITP
- On new builds 1.5% of the total purchase price will go on a stamp duty
If this list overwhelms you, do not worry as your estate agent and real estate lawyer are used to dealing with property sales, and will take care of the paperwork on your behalf. All you really need to do is know exactly where the money will come from and exactly how much you can afford, and you will be one step closer to acquiring your dream Spanish property!