Buying a house is a significant decision, particularly when it comes to international real estate investments. Spain, with its stunning landscapes, vibrant culture, and pleasant climate, has become an attractive destination for individuals seeking a new place to call home. However, it's crucial to be aware of the expenses involved in the process of purchasing a house in Spain to ensure a smooth and well-informed transaction. In this blog post, we will explore the various costs and fees associated with buying a house in Spain, enabling you to make informed decisions and budget effectively.

Having a mortgage is not the only expense involved in the process and you'll have to plan accordingly. Banks in Spain generally finance 80% of the value of the property you wish to purchase, meaning that you need to have at least 20% of the property value saved up in order to pay a deposit. 

MORTGAGE EXPENSES

THE VALUATION OF PROPETY

If the buyer is going to apply for a mortgage, then he or she will have to pay a surveyor to value the property. This is often organised by the bank and after this property valuation, then the bank will know what percentage of financing it can provide.In 2023, the valuation will cost between 250 and 600 euros depending on the company carrying out the process, the type of property and its valuation. Some Spanish banks will cover these costs but not all, meaning it is important to check this in the conditions of your loan. Once the valuation is complete, it is valid for 6 months from the date of issue. 

OPENING FEE

Some banks may charge you a fee to either open an account or take out a mortgage and this fee can be up to 2% of the capital loaned, as agreed with the financial institution. However, in Spain nowadays there are many banks that do not apply these fees. Note that in order to take out certain mortgages, banks may also require you to take out home or life insurance as well, something that also often lowers the interest rate of your mortgage. 

There are a range of other expenses and property taxes in Spain that must be taken into account and paid prior you can become the owner of your new home in Spain. Make sure you understand all the expenses before you are locked into the deal.Between the valuation of the property, the notary, registry and the corresponding taxes, experts recommend having additional savings of between 10% and 12%, depending on where the property is located or if the property is new or resale. 

THE NOTARY

To legalize the purchase and ensure its registration, you will need to engage the services of a notary. Notary fees in Spain are based on the purchase price of the property and typically range from 0.1% to 0.5%.

THE LAND REGISTRY

It also costs money to register the deeds that have been signed by the notary. Once again, these fees are fixed by Spanish regulations and depend directly on the price of the property, although they are usually between 400 and 700 euros.

TAXES WHEN BUYING A PROPERTY IN SPAIN

If you are buying a property in Spain you must also keep some extra money aside to pay Spanish taxes, although the amount will depend on the price of the home and whether it is new or resale.

NEW HOME TAXES | LAND PLOT

The buyer of a home must also keep some extra money aside to pay Spanish taxes, although the amount will depend on the price of the home and whether it is new or second-hand.If you buy a brand new home in Spain, then you will have to pay more taxes. This is because new-build homes are subject to VAT (IVA in Spanish). In 2023, VAT will amount to 10% of the property price. In other words, you would need to save up an additional 15,000 euros in the case of a 150,000 euro home. 

If you buy a plot/lot of land in Spain, fasten your seatbelt and swallow carefully so you don’t choke as 21% VAT is applied for any commercial property and plots of land purchased. A second tax must be added to VAT in the case of buying a new home or plot in Spain: the Documented Legal Acts tax (AJD). This tax is the equivalent of stamp duty in Spain and is still paid by the buyer. The amount also depends on each Autonomous Community. Note that these taxes do not apply to previously owned homes, just new builds, commercial property and plots/lots of land.

The Basque Country has not AJD. On the cheaper side of AJD tax, you find Navarre, Melilla, Madrid, Ceuta and the Canary Islands with AJD under 1%. Aragon, Cantabria, Catile La Mancha, Castile Leon, Catalonia, Valencia, Extremadura, Galicia and Murcia are the most expensive autonomous communities with 1.5% AJD. 

RESALE | PRE-OWNED HOMES

For pre-owned homes in Spain, the most important tax to keep in mind is the Property Transfer Tax (ITP). In this case, the amount depends on the percentage applied to the registered price and the autonomous community in which the house is located, although as a general rule, a rate of between 6% and 10% is applied. The following ITP rates are to be applied in 2023:

4%

The Basque Country

6%

Navarre, Melilla, Madrid and Ceuta

6.5%

Canary Islands

7%

La Rioja

8%

Murcia, Extremadura, Castile Leon, The Balearic Islands, Asturias, Aragón and Andalucía.

9%

Castile La Mancha10%Cantabria, Catalonia, Valencia and Galicia.

It should be noted that for VPOs in Spain (Spanish subsidised housing), for large families (known in Spain as familias numerosas), people with disabilities and for young people there are often lower rates.

ESTATE AGENCY

Estate agency fees or commissions are paid by the seller, unless otherwise agreed. If the buyer uses a search agency then search fees are paid by the buyer. Most people use agents to find property in Spain. Agents have better understanding than attorneys on the local market. Make sure you hire a Real Estate agent that works with a direct attorney. However you should be aware that agents charge between 2% and 10% of the sale price, depending upon the region and type of property. Unless the buyer has specifically agreed to pay the agent’s fee this cost will be built into the sale price.

ARE FOREIGNERS ALLOWED BUYING A HOUSE IN SPAIN?

Of course! There are no restrictions on buying property in Spain, whether it’s commercial, residential or land. In fact, Spain encourages investment by foreigners, both resident and non-resident. Remember that if you buy a house worth more than €500.000 you can apply for a Golden Visa and obtain permanent residency. If you do not buy a house for this value, you can apply for a spanish retirement visa / NLV Spain or any of the additional options available.  

So, with all of that in mind, it's time to get searching for your dream home in Spain. And don't forget that here at WaiKool Homes, we can also help you find the right mortgage for your needs.If you want to browse and find your dream home, you can do it HERE.