Help and Guidance if you are considering Spanish Property ownership
Once you make the serious decision to purchase property in Spain, it’s important to spend some time looking at every aspect of your finances as early as possible in the buying process. There are a number of different areas you will need to consider in advance:
Have you thought about the effect the fluctuating currency rate could have on your funds?
The price of your property will fluctuate constantly in line with changing Euro exchange rates. This is why we recommend opening an account as soon as you can and enlisting the services of one of our personal Currency Consultants to benefit from their expertise on the fluctuating currency market and the tools they are able to offer to help you plan your currency strategy. It’s also a good idea to sign up with a currency exchange specialist, such as Halo Financial, rather than make your exchange through your local bank, as they offer better exchange rates and do not charge fees on transfers more than £5,000.
How will you cover your monthly repayments?
You will need to make sure you are clear on how much you will need to pay per month and how you are going to make those payments. You may wish to consider setting up automatic regular payments if you are transferring money to Spain.
Have you considered the hidden costs of your purchase?
In addition to the actual cost of the property you will be purchasing in Spain, you will need to think about the other costs that may arise during the purchase process – such as those that arise from the pound to euro currency exchange rate fluctuations between the time you decide to buy and your final property purchase date. These include things like solicitor’s and estate agent fees and property taxes. It’s of paramount importance that you assess this before you go ahead and buy your Spanish property so that you know exactly what you will need to pay before you complete your purchase. These additional costs will likely include the following: property transfer tax (around 5-10%, ITP on a resale property), 10% VAT (on new build properties), 1-2.5% on notary costs, title deed tax and land registration fees, around 2% on legal fees and 1.5% on stamp duty.
How are you going to fund the property purchase?
You may well be able to purchase your property in cash, but if not, there are several loan options you could consider – such as a mortgage. You will need to look through all the different options to ensure you know exactly what is available and what would be the most suitable for you. Theoretically it should be no more difficult for you to get a mortgage in Spain than it is in the UK. In fact, Spain encourages foreign investment in property – although you may find that there are more restrictions than if you were a Spanish citizens. It’s a good idea to speak to a mortgage broker in Spain in advance to discuss all the options that are available to you depending on your personal circumstances – such as how much deposit you are able to pay upfront and how much you can afford to pay in your monthly repayments. You will also need to look at whether this will be a second home or not, as if so this is considered more risky and you may well need a bigger deposit; e.g. if you will be living full-time in Spain you will probably only need a 20% deposit, whereas for a second home you may need around 30-40%. Most banks will conduct an assessment of your lifestyle and any other debts you have to make sure you can afford the mortgage repayments on your property. Average interest rates in Spain usually sit at around 4%.
When should you consider opening a bank account in Spain?
We recommend opening a bank account as soon as you know that you will definitely be purchasing property in Spain, as this will make the whole process much easier. This will allow you to move quickly once you know you want to purchase property here, as well as set up direct debits and standing orders for all utilities and bills. We recommend choosing a bank with a branch within the neighbourhood you are looking to purchase in, and it’s usually a good idea to ensure that the bank you chose can speak your language – even better if you can request that your contract comes in your own language, so you can understand what you are signing. What can be a good idea is to visit a few different banks so you can get a feel for their services and facilities that they offer and what works best for you.
Have you thought about the kinds of insurance you will need to invest in for your purchase and new life in Spain?
Having insurance is an unfortunate but essential part of life to protect you, your family and belongings against the fact that accidents do happen and natural disasters can occur. You can protect yourself with the right insurance options – ensuring your peace of mind when you move. The main insurances that you will need to consider are house insurance, car insurance and potentially health insurance.
It’s a good idea to look into this diligently to ensure that you assess all options available to you and how to make sure you are making the best choice – considering the actual detail of the policy, the cost and the eligibility requirements; these will usually differ depending on the insurer that you choose. It’s a good idea to choose an international insurer so that you can also communicate in English rather than Spanish.
If you will be driving a car in Spain, you will need to note that car insurance here covers the vehicle rather than the driver; this means that anyone can drive the vehicle providing they have a licence and your permission.
You may also wish to consider healthcare insurance options, as the Spanish state healthcare system does not cover all the services that you may be used to in the UK with the NHS. If you would like further information and contact details of insurance providers we can recommend – please contact us.