Finance Assistance

Probably the most important part when purchasing a property is the financial side. Finding a property to buy is going to be the most enjoyable leg in the journey towards your dream. Costa Blanca Property Sales are here to take the burden and worry from you of handling the financial side, as we are experienced throughout the entire purchasing procedure. However, it is still very important for you, to be made aware of how the system works, this is why we have set out the list below but dont be put off by it all, as not all can apply to everyone as every circumstance differ and remember we are here to manage everything for you……..

STANDARD PROPERTY PURCHASE PROCEDURE

Normally the purchase is initiated with a reservation agreement, which takes the property off the market. The deposit to pay at this state is 3.000€, this amount is held in a client account by the agent. Do make sure that you obtain receipts. Then your lawyer will begin to check the registration of the property “NOTA SIMPLE” which will show if there are any charges against it. Within a week or two a private seller agreement or option is signed between the purchaser and the seller. The seller and buyer’s lawyer together with the agent should determine all outstanding debts and rates in order to arrange the payment of these according to the agreement. These could be property tax (I.B.I.), community fees, telephone, electricity, water bills, etc. It usually takes 28 days from the day you have placed your deposit until completion. As the system is much simpler than in many European Countries, completions can take place within a few days and this is negotiable and depending on the agreement of both parties.

MORTGAGES

Mortgages are also readily available for qualified purchasers either from banks in Costa Calida or Costa Blanca. Firstly you must realise that the sum that the bank will finance is between approx. 70% and 80% of the purchase price in the case of residents and 60% for non-residents. Through some of our Bank contacts we can raise up to 80% for qualifying non-residents. A Letter from your Bank Manager, an Statement from your Accountant, indicating your Income position, Photocopy of the Passports of the persons in which name the property will be bought, is all is needed at this stage with the Bank. There is a tax required on all legal documents, which is calculated according to the amount of the mortgage. The expenses relating exclusively to the bank are the commission for opening the account (normally 1%) plus the interest of the loan. At the time of the writing and considering that interest rates are dropping, the rate for the first year would be between 4.0% and 5.5% whereas, for the following years, it would be the amount reached after adding the necessary differential of 1% or 2% to the reference index (EURIBOR), which is published monthly. For example, if the last published reference index was 3% either 1% (4%), 1.5 (4,5%) or 2% (5%) in accordance with the agreement.

Some financial institutions or banks use reference indexes other than the EURIBOR and also charge commission for examining the application or in the event of early repayment, whether partial or total, i.e. 1% or 2% of all the sums repaid to the bank before the due date. Naturally the figures stated here are subject to change and it is always advisable to compare rates at several different banks. However, one factor remains a constant whichever bank is approached. In order to be eligible for a mortgage you must contribute between 20% and 30% of the total price, together with the corresponding expenses. You will also be asked to provide proof of a fixed monthly income of not more than 35% of the loan in question. It is similarly advisable to retain 20% to 30% in a savings account specifically for the property purchase. This way you can take advantage of the tax benefits, which include a 15% tax deduction for a maximum of five years. Similarly once the loan has been taken out and the house purchased, you can obtain a tax deduction on both the capital invested, as well as the interest paid.

EVALUATION FEE

In order to check that the purchase price is appropriate and fair, the bank will request a professional evaluation carried out by an independent firm. This comprises a detailed report in respect to the quality of construction and the material used, the situation, state of repair, etc. of the property and, most important of all, its market price which takes all of the above into account. The fee for the evaluation is between 130.00€ and 180.00€.

LAND REGISTER FEES

The mortgage must be registered with the land register and, again, the fees depend upon the amount of the loan. For example, if the mortgage is 100.000, the land register fees will be 100.00€ whereas for a loan of 200.000 € the land register fees will be 200.00€.

INSURANCE

This is established according to the minimum evaluation received. It is obligatory to take out an insurance policy covering fire and Third party responsibility. The cost of this is approx. 1.65€ per 1.000€. It usually takes 28 days from the day you have placed your deposit until completion. As the system is much simpler than in the UK, completions can take place within a few days this is negotiable and depending on the agreement of both parties. After the reservation agreement the completion takes place in front of a notary, who issues the title deed “ESCRITURA”. If the purchase is financed with a mortgage (SEE: MORTGAGES) the bank representatives are present in order to pay and sign the mortgage. The title deed should then be registered by the lawyer in the corresponding Property register.

WHAT ARE THE COSTS ON TOP OF THE PURCHASE PRICE?

The law states that the seller should pay a part of the notary fee and what is known as “PLUSVALIA MUNICIPAL”, all other costs are to be paid by the buyer, this is more practical as he stays here and it is likely, that the seller leaves the country. The lawyers charges around 1% of the purchase price

The cost for Notary and registry for a property of:

100.000€ is approximately 7.000€.
200.000€ is approximately 14.000€
500.000€ is 25.000€

When you get to the Notary and pay for your purchase you will need: All your money in place to buy the property. The original passports of the names of the purchasers. Your Lawyer will be present and ensure safe completion. The new Title Deed (ESCRITURA) will be registered in your name.

PLUSVALIA MUNICIPAL

This is a municipal tax that is paid every time a property changes hand. It is a bit complicated to calculate. Basically it depends on the property’s tax value and how long the property has been owned by the seller, it usually is between 300.00€ and 1.000€

TRANSFER TAX OR VAT (IVA)

Depending on the parties juridical status and the type of property, there is 6% transfer tax or 7-16 % VAT (IVA). Normally this means; first hand homes, you pay 7% VAT plus 0,5% Document tax. Second hand homes you pay 6% Transfer tax. Villa plots from the promoter, you pay 16% VAT plus 0,5 % Document tax. Now you have nearly reached the end of all the purchasing property procedures and after you will have insured your new home and you will have made a Spanish Will relating to the beneficial ownership of the property, everything will be finally completed. After such a hard piece of work you more than deserve to ‘chill out’ under the Palm trees of your new garden, having your first cup of tea together with your family and friends.

TAX LIABILITIES

Every owner of a property in Spain will of course have some responsibilities to the Tax Authorities (HACIENDA).

NIE TAX IDENTIFICATION NUMBER

Every resident employed or self-employed as well as every proud owner of a property in Spain has got a Spanish Tax Identification Number (NUMERO DE IDENTIFICACIÓN DE EXTRANJERO) or NIE for short. That number identifies you to the Spanish HACIENDA (Tax Authorities) and all Spaniards have that too. Applications are made (as with all other formalities your Passport and photocopy will be necessary) at the local police station of the POLICIA NACIONAL.

INCOME TAX

If you are becoming a Spanish Resident after having spent more than 180 days in the same year in the country, you will be required to declare and will be liable for Spanish Income Tax. If you are an employee and your income is produced in Spain this will be done for you by your employer. There is also a double taxation agreement existing between the UK and Spain as well as a booklet explaining all about it, which is available from your local tax office in the UK or at Getaway Villas office.

WEALTH TAX

As non resident but property owner your Spanish property is deemed to be your second home and for the Tax authorities that means that you could rent your property and thereby earn an income. The percentages compared to the rest of Europe are still small and are based on the cadastral value of the property which is normally lower than the market value. Wealth Tax is applicable with no exemptions and the percentage is 2 tenth of 1% of the cadastral value of the property. Both the Income and Wealth tax for residents and non residents can be declared together on form 214 and paid in any time of the year. The forms are available from all the Tax Authorities, however, it is much more comfortable using an accountant/tax advisor. (GESTOR)

MUNICIPAL TAXES AND FEES

These are charged to all owners of property not depending on their residence status. RATES (on your property) IMPUESTO SOBRE BIENES INMUEBLES: MUNICIPAL WATER (AGUA MUNICIPAL) Normally water is charged depending on your individual consumption of it, however some Urbanisation’s have their own wells and some do include the consumption in the community fees.