The buying process
Buying property in Spain as a non-Spanish resident involves several important steps, and partnering with a reliable real estate agency like Spánarheimili can make the process smoother and more secure. Spanish property laws differ from those in many other countries, and there are specific legal requirements that foreign buyers need to navigate, such as securing an NIE number (foreign identification number) and understanding local taxes and regulations.
Our offices specialize in helping foreign buyers and provides comprehensive legal and practical assistance throughout the process. This includes thorough due diligence, such as checking the property’s legal status, ensuring there are no debts or unpaid taxes, and handling all legal documents related to the purchase. Whether you're buying a new-build or a resale property, having expert legal guidance helps prevent complications and ensures a transparent transaction.
With Spánarheimili, you not only get expert property advice but also legal protection, making your property purchase in Spain a stress-free experience. Our multilingual team provides clear communication at every stage, so you can confidently invest in your dream home, knowing all legal aspects are properly managed.
Finding the Perfect Property
Our experts at Spánarheimili help you during the property search phase, which is essential for finding the right home in Spain. As a specialized real estate agency, we have deep knowledge of the Spanish market and all its residential areas, especially for foreign buyers. Our team of professionals understands the unique needs of international clients, ensuring that you view only properties that meet your criteria, budget, and lifestyle goals.
We provide expert guidance through the entire search process, from identifying the best regions and properties, to offering help to evaluate each property, ensuring it aligns with your investment or living expectations and avoiding potential pitfalls. With our extensive network and market expertise, we can access off-market listings and exclusive opportunities that may not be widely available.
Additionally, by offering legal assistance from the beginning, Spánarheimili ensures that every property considered is legally sound, saving you time and avoiding risks. This partnership simplifies the property search and gives you confidence in finding the right home, tailored to your needs.
Purchase of a Resale Property
The process of buying a resale property in Spain through Spanarheimili involves these essential steps:
1 - Property Selection: After selecting the resale property of your dreams, whether it’s a villa, apartment, or bungalow, you make the decision to proceed with the purchase.
2 - Reservation Agreement: Once you have chosen a property, you typically sign a reservation agreement and pay a small deposit (usually between €3,000 and €10,000) to secure the property temporarily while legal checks are conducted.
3 - Private Purchase Contract: After completing the legal checks, a private purchase contract (Contrato de Arras) is signed, usually within 15 to 30 days, and a deposit (typically 10% of the purchase price) is paid.
4 - Financing Arrangements: If financing is required, this is the time to secure a mortgage, with Spánarheimili assisting you in navigating local banks and mortgage options.
5 - Final Payments: Prior to completion, any outstanding balance, including taxes and fees (typically 10% of the purchase price), is prepared for payment.
6 - Notary, Title Deeds and Registration: The sale is finalized when you sign the title deed (Escritura de Compraventa) before a notary, transferring ownership of the property to you. Finally, the property is registered in your name at the local Land Registry, ensuring your legal ownership is officially documented
This process ensures that the purchase of a resale property is legal, secure, and transparent, providing you with confidence in your investment!
Purchase of a new building or a property under construction
The process of buying a new-build property in Spain through our agency involves several steps:
1 - Property Selection: After selecting the new-built property of your dreams, either off-plan or under construction, you made the decision for the purchase.
2 - Reservation: Once a property is chosen, you typically sign a reservation agreement and pay a small deposit (around €6,000 to €10,000) to secure the property.
3 - Private Purchase Contract: After legal checks by Spànarheimili, a private purchase contract is signed, usually within 30 days, and a deposit (usually 10%-30%) is paid
4 - Stage Payments: As the construction progresses, additional payments are made at predefined stages, outlined in the contract.
5 - Bank Guarantee: The developer provides a bank guarantee for each payment, protecting your money in case of delays or non-completion
6 - Completion: Once the property is finished and the necessary certifications (like the first occupation license) are obtained, the final payment is made.
7 - Notary and Title Deeds: The sale is completed when the buyer signs the title deed before a notary, transferring ownership.
8 - Registration: The property is registered in your name at the local Land Registry.
This process ensures that the purchase is legal, secure, and transparent.
Banking & Financing
Having a Spanish bank account is almost essential for non-residents who own property in Spain. This account simplifies payment like utility bills, community fees, and property taxes.
Non-Spanish residents can obtain a mortgage in Spain, which is a practical option for foreign buyers looking to finance their property purchases. Typically, foreigners can borrow between 60% to 80% of the property’s value, depending on the lender and the buyer’s financial circumstances. The specific percentage may vary based on factors such as the type of property (residential or investment) and the applicant’s income level.
To secure a mortgage, non-residents will need to provide various documents, including proof of income, a valid passport, and details regarding existing financial commitments. Banks will also require a Spanish tax identification number (NIE). Various types of mortgages are available in Spain, including fixed and variable-rate options. Fixed-rate mortgages offer stable monthly payments, while variable rates may change based on market conditions.
It’s important for buyers to be aware of additional costs associated with obtaining a mortgage, such as arrangement fees, notary fees, and property registration fees, which can add up to around 10-15% of the property’s value. Given the complexities of the mortgage process, it is advisable to seek assistance from professionals who specialize in Spanish property law to ensure that all paperwork is handled correctly.
At Spánarheimili, we can assist you in navigating the mortgage landscape and help you acquire the best rates for your financing needs, making the process smoother and more efficient.
- Mortgage. Up to 70 percent of the bank valuation or sale price of the property. It is the bank that sends its representative to inspect and value the property that is being requested for a loan. The bank's assessment (bank assessment) is the assessment that the bank uses for a possible loan amount. The bank valuation does not have to be the same as the purchase price, so the situation may arise that the bank wants to lend more or less than requested. The bank appraisal costs the borrower around 150-400 euros (depending on the size of the property).
- Interest rates: Have been around 2,5 to 4,00% (May 2019) based on non-indexed fixed interest rates.
The bank’s interest rate decision is based on the view that the longer the loan period, the higher the interest rate. The bank also evaluates the applicant’s payment and Spánarheimili can act as an intermediary to provide an interested buyer with a loan guarantee from a Spanish bank, but several Spanish banks specialize in loans to foreigners who do not have a permanent residence in Spain. - Borrowing fee: Is from 1,0% to 2,0%.
- Debt service burden.The estimated debt service burden per 100.000 euros (about ISK 13,6 million) with 3,0% interest for 30 years is about 450 euros (about ISK 57.500) per month. (Exchange rate reference - 1 euro = ISK 137).
- Advance or advance payment fee. During the first 5 years of the loan period, there is a 0,5% advance or advance payment fee, but after 5 years this same fee is 0,25%
- Deposit authorization: The borrower is allowed to pay in the principal of the loan at any time and either reduce the payment burden or shorten the loan term. It should be noted that since there is no indexation on loans in Spain, the debtor sees the principal decrease every year and the balance of the loan decreases visibly in the first months.
- Loan application and documents. The borrower is allowed to pay in the principal of the loan at any time and either reduce the payment burden or shorten the loan term. It should be noted that since there is no indexation on loans in Spain, the debtor sees the principal decrease every year and the balance of the loan decreases visibly in the first months.
Cost of the purchase
The buyer’s cost of buying real estate in Spain is higher than in Iceland. For example, a buyer of real estate has to pay value added tax / sales tax on the declared purchase price to the Spanish government upon signing the waiver. In general, the buyer’s cost of purchase can run into around 11% -16% of the total cost calculated from the purchase price of the property and paid upon waiver. The cost of the purchase is broken down roughly as follows:
| VAT:
Is 10% of the stated price. 10% |
Notario costs:
There is a fixed document and administration cost that varies depending on the price of the property, but can be around 0,5% of the stated price 0.5% |
Registration fee for purchase agreement:
1,5% of the stated purchase price. 1.5% |
Registration fee w/loan:
0-1,5% of the loan amount if a loan is taken. Depends on banks. 0% - 1.5% |
| Borrowing fee w/loan:
About 1.0% -2,0% of the loan amount if a loan is taken. 1% - 2% |
Banking:
150-400 euros depending on the size of the property - if a loan is taken. 150-400€ |
Energy contracts:
300 – 500 euros for the establishment of water and electricity contracts for the purchase of a new building. 300-500€ |
NIE number:
150 euros per person for the creation of a NIE number. 150€ |
| Legal costs / administration fee:
The amount depends on the scope of the purchase and its nature. It can be assumed that the cost of legal assistance, interpretation into Icelandic and advocacy through the purchase agreement process is around 1000-1500 euros and an additional administration fee depending on the scope of the transaction. 1000-1500€ |
Credit:
If the applicant takes out a loan, he has to expect to pay about 3-4% of the loan amount in the cost of the loan. Included in this amount are translation costs, but all financial data must be translated by a certified document translator into Spanish, but such a translator is provided by Spanarheimil. 3%-4% |
Real estate operating costs and annual taxes
All properties have varying operating costs depending on the size and type of property. Most properties have access to a swimming pool garden, and the arrangement in Spain is that each owner pays a “Community fee” to cover all common costs, for example cleaning the swimming pool, gardening, lighting the common property, etc. The amount of water, electricity and gas bills varies and depends on usage at any given time. Real estate insurance is advantageous.
Example of operating costs and taxes on an annual basis based on a property valued at 180.000 euros.
| Housing Association fee:
Is 10% of the stated price. 500-1100€ per year |
Insurance:
300-450€ per year |
Energy bills:
Around 1000 – 1500 euros based on 50% utilization. 1000-1500€ per year |
Property taxes:
250-350€ per year |
Property tax::
100-200€ per year |
According to the above, the operating cost of a property to the value of 180.000 euros or about 25 million Icelandic kronas can be around 180 - 300 euros per month based on 50% utilization of the property per year. This cost corresponds to ISK 25.000 - 40.000 per month.
Purchase of property through Icelandic companies
Icelandic private limited companies (ehf), public limited companies (hf) or partnerships (sf) can buy real estate in Spain as well as open bank accounts and establish banking transactions in certain Spanish banks..
It is necessary to apply for a Spanish identification number for such a company or a so-called CIF number so that the company receives a limited work permit in Spain and enjoys all legal rights in Spain. The tax domicile of the relevant company will remain in Iceland and it is therefore not necessary to have a Spanish bookkeeper or accountant for the Icelandic company.
Spánarheimil’s staff assists the representatives and owners of such companies to obtain a Spanish identification number and to establish banking transactions in Spain, but all this work can be done by proxy.
For many people, it can be an enormous tax advantage to have companies in their possession buy real estate in Spain, but the staff of Spanarhomeli provides all advice to interested parties.
Today, Icelandic companies can obtain financing in Spain through certain Spanish banks for the purchase of real estate in Spain. Under certain conditions from the banks, loan terms for companies can be the same as for individuals, cf. above.
