BUYER S GUIDE. 1 P a g e

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1 BUYER S GUIDE 1 P a g e

2 Contents Introduction Why in Spain? Why on the Costa del Sol? Decide what you are buying for Buying costs Why choose Target property Spain? The Property Selection Process Mortgages 2 P a g e

3 Introduction So you ve probably been dreaming about owning a property in Spain for a while.you ve talked about it, planned for it and saved for it. What s the next step? The buying process in Spain is not very different from what you are already familiar with at home, but the language and culture can make it seem rather daunting. Target Property Spain has created this simple guide to steer you through the entire process, from start to finish! 3 P a g e

4 Why Spain? Why on the Costa del Sol? Typically enjoying over 300 days of sunshine a year, it is little wonder that the Costa del Sol remains one of the most popular destinations for those looking to purchase an overseas property in the sun. It isn t just the weather though, the Costa del Sol also enjoys relatively low living costs, good healthcare and a relaxed lifestyle as well as all the facilities and infrastructure that other destinations in Spain simply don t have, like our major international airport, transport networks, golf courses, nightlife, international schools and, of course, a ready-made expat social life. 4 P a g e

5 Decide what you are buying for You will most certainly have different criteria depending on whether you are buying property as an investment that you will rent out, to use as a holiday home, or to live in permanently. Investment Buying as an investment means you will be looking for properties that increase in value and/or which can provide rental income. Generally, this means looking in holiday hot spots, close to the beach and amenities. Holiday home Consider buying a holiday home that is easy to lock up and leave. You don t want to waste time maintaining a property where you only spend a few weeks a year. Apartments and villas in developments are generally the best options here as the grounds will be maintained for you and the presence of neighbours will help to keep your property secure when you re not there. Buying in popular tourist areas will also make your property easier to rent if you want to earn income when you are not using it. Permanent home Look for a home and region that fits your budget and offers the quality of life you desire in terms of local infrastructure, facilities, and accessibility. So while you may long for a rustic country villa in the hills, it may not be viable if you re also keen to be near stores and other expats. You will also need to consider the local schools if you have children, and don t forget the ease of access as well as public transport options if you wish to travel or entertain guests. 5 P a g e

6 Buying costs When evaluating your budget, you need to allow for a certain percentage on top of the agreed purchase price to cover the various fees and taxes that must be paid. If you allow an additional 12% for a resale (second-hand) property or 15% if you re buying a new build or off plan property you will have everything covered and should get a few Euros change! These taxes and fees are comprised as follows: IVA (Spain s equivalent of VAT) This tax is 10% and is applied only to residential properties that have never been occupied previously, plus 1% stamp duty. So this applies only to new build properties and off-plan purchases. ITP (Impuesto sobre Transmisiones Patrimoniales) This transfer tax is due on resale (second-hand) property. The tax amounts are banded as follows: o 8% for purchases up to 400,000 o 9% for purchases between 400,001 and 700,000 o 10% for purchases over 700,000 Legal fees Most lawyers charge 1% of the purchase price to handle all the conveyancing for you. (See Page 8) Additional fees There are a few, smaller additional fees which many estate agents forget to mention. These are comprised of minor charges like notary fees, land registry costs for property registration, setting up new contracts with utility companies etc. all of which amounts to around 2.5% 6 P a g e

7 Why choose Target Property Spain? It s so important to choose the right estate agent to help you. Target Property Spain is a full-service property agency where client service comes first our aim is to ensure we find you the right property and to make the entire process of buying and taking ownership as simple and straightforward as possible. What s more, we have access to every single property listed by every established estate agent along the Costa del Sol so you don t need to waste time booking appointments with countless different estate agents we can arrange to show you any property anywhere in the area. This, coupled with our extensive knowledge of the region and a wide variety of service providers, all who receive the Target Property Spain seal of approval means we really are a one-stop shop. 7 P a g e

8 The Property Selection Process Finding the right property Before your arrival, our Property Consultants will have spent time with you on the phone, getting to know your requirements and criteria, and will have prepared a shortlist of suitable properties in time for your arrival in Spain. By taking a consultative approach with our clients we create a two-way relationship from the very beginning. Most of you will have at least a rough idea of what you are looking for and a budget in mind by engaging with you about the finer details, we are then able to source the ideal properties to view when you arrive. Of course, your feedback as we move through the viewing process gives us an even better understanding of exactly what will meet your needs, and we make sure we do everything we can to find it. Purchasing the Property Once you have found your property and agreed on a purchase price, the next steps are as follows: Instruct lawyer: You don t have to use a lawyer, but unless you have a strong grasp of Spanish language and the Spanish legal system, we strongly advise you to instruct a lawyer to represent you. Target Property Spain are happy to recommend local lawyers who can communicate with you fluently in your own language and handle the conveyancing for you. This will include not only the transfer of the title deed but also arranging your NIE number (Número de Identidad de Extranjero) which is your foreigner s identification number, and setting up all the necessary payments for utilities, town hall payments and community fees. Your lawyer will thoroughly research the paperwork on the property you intend to buy and protect your interests. They will ensure the property is free of debts, restrictions, charges or encumbrances and, of course, answer all of the countless questions which you will no doubt have in mind at this point. 8 P a g e

9 Many property buyers will grant a Power of Attorney to their lawyer in Spain to act on their behalf in relation to the purchase of their property. This means that there is no need to personally be present when contracts or deeds are signed. Many of our clients based outside of Spain find this to be the simplest way of handling the transaction. Pay a Deposit to reserve the property and take it off the market To reserve the property and take it off the market while your lawyer is carrying out the due diligence you will need to pay a deposit of between 3000 to Normally, reservations are taken on a credit card, so it is often a good idea to inform your credit company before leaving home that you may be making a transaction whilst you are away. We will require a copy of your passport and a recent document showing your home address. Legal Checks & Funds Transfer When buying a resale property in Spain, completion normally takes place within approximately 6 weeks of signing contracts. This gives buyers enough time to arrange financing if needed and organise travel plans, furniture etc. When buying off-plan property in Spain, there may be interim payments due prior to completion, or it may simply be the remainder of the funds payable at completion (this will depend upon the payment terms in the contract). Before arranging completion your lawyer will have completed the due diligence, and will ask you for the funds due at that point, or liaise with your lender regarding any financing that you may be taking out on the property. The exchange rate can of course vastly affect the amount of funds you need to transfer. Target Property Spain can recommend specialist currency providers who will work with you to advise you on the best time to transfer your funds and offer higher exchange rates than the high street banks. Typically you ll save around 4% using a specialist current company, which, when you re talking about a property purchase, is an awful lot of money! Completion and Taking Possession Once the funds have been received by your lawyer, you will sign the title deeds, either in person at the notary, or via your lawyer with power of attorney, register your ownership in the Land Registry and the property is then legally yours to enjoy! Mortgages There is no doubt that Spanish banks have limited their mortgage lending due to the credit crunch, but this does not mean that mortgages are not available to foreign buyers. Target Property Spain work with independent mortgage advisors and banks who lend and negotiate attractive mortgage packages for our clients, regardless of nationality. 9 P a g e

10 We can arrange an initial consultation for you, prior to your arrival in Spain, and obtain an Agreement in Principle (AIP) ensuring the budget you have set for your purchase is appropriate for you. We would advise anyone thinking of using finance to assist with a property purchase to ensure that they have been pre-approved before they agree to hand over funds to secure a property. Many aspects of the mortgage marketplace have changed since the recent creditcrunch and Spain is no different. Spanish banks are once again lending to foreign nationals but at a reduced loan to value (LTV) of between 50 70%. We can potentially finance deals above these levels by using a combination of products available, but this must be reviewed on a case-by-case basis. Currently Spanish banks are only able to provide mortgages on a capital repayment basis and generally over a year term. Rates can vary but most non-resident mortgages currently range from around 2.25% to 5.4%. (*Correct as of ). Many of our clients require their mortgages to have a certain element of flexibility in order to pay down the mortgage without incurring heavy redemption penalties. Our providers have access to a number of products, which allow clients to do this with a maximum charge of 0.5% of the amount repaid early. CONTACT US Calle Mérida de Jarales. C.C. Los Jarales, Local 9. Calahonda Mijas Costa , Málaga (+34) info@targetpropertyspain.com 10 P a g e