Buying in Spain, what do I need to know?
We deal with all of the Spanish banks and the UK banks that operate in Spain, as well as a number of European investment banks. Dealing with so many banks allows us to offer you the best deal whatever your circumstances.
Due to the annual wealth tax and the inheritance tax in Spain, there are often certain tax advantages to having a mortgage on your Spanish property. These benefits can be enhanced further buy taking advantage of a low interest rate currency, such as the Swiss Franc. (Swiss Franc mortgages on Spanish properties have an interest rate of approximately 4% and Yen mortgages have a rate of approximately 2%).
After years of operating in Spain and due to the volume of business that we introduce to banks, we regularly negotiate lower interest rates and fees than you would normally be offered by the banks.
What type of property can I get a mortgage on?
We can arrange mortgages for individuals or companies to buy main homes; second homes; rental or investment properties; off-plan properties and commercial properties.
Equity release mortgages are available.
What currency will my mortgage be in?
All Spanish banks will provide mortgages in Euros, but we can also arrange mortgages in other currencies such as US Dollars, Sterling and Swiss Francs.
What is the maximum loan amount (LTV%)?
Depending on the valuation of the property, non-residents can borrow up to 80% for purchases and equity release. All mortgages are subject to income but some banks will also take rental income into consideration.
What is the minimum loan amount?
The minimum loan amount that Somerset Mortgages will consider is €75,000.
How long is the term of the mortgage?
The mortgage term can be from 10 - 40 years.
How much will the bank charge me?
Generally the banks will charge you a 1% arrangement fee, however we will negotiate on your behalf to reduce this.
Do I need life assurance?
Yes, life assurance is mandatory. We can help you arrange this at minimal cost.
Which mortgage types are available?
Both capital repayment and interest only mortgages are available for both purchase and equity release.
Interest rates
The interest rate will depend on the currency of the mortgage. For example, if a Euro mortgage was selected then the EURIBOR (European Interest Offered Rate) would apply, plus the bank's margin. Rates are available from 3.4%.
Fees and Taxes
Estate Agent Commission - Varies from 6% - 10%. It is important to clarify if this is paid for by the seller or the buyer in your initial discussions.
Notaries Fees - Allow 0.5% - 1%.
Property Transfer Tax - Impuesto sobre transmisiones patrimonial - 6% on all purchases.
Stamp Duty - 0.5% on 'new builds'.
VAT - Impuesto sobre el valor anadido (IVA) - 7% on 'new builds' and 'self builds'.
Local Capital Gains Tax - Plus valia de impuesto sobre el incremento del valor de los terrenos de naturaleza urbana - is levied on the seller, but by convention is paid by the buyer because the bill will arrive after the sale has gone through, by which point the seller has disappeared. The tax is charged on a progressive scale from 2 - 40% on the increase of the property value. It would be prudent to contact the town hall to find out how much is due and negotiate the equivalent amount off the price.
Withholding Tax - If you buy a property from a non-Spanish resident, which has been owned for less than 2 years, then you must pay 5% of the purchase price directly to the tax authorites instead of the seller, which is offset against the sellers capital gains tax liability.
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When buying property overseas, we recommend that you seek professional tax and legal advice.
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