Buying real estate with a Spanish mortgage

Costs of buying property with a Mortgage in Spain have dropped considerably in the last 5 years.

With lenders covering Notary and Land registry fees for the mortgage deed. Also they are obliged to pick up mortgage deed tax costs.

Therefore valuation fee and bank arrangement fee are the only two costs you can expect, that are solely linked to the mortgage itself. Unless you are contracting a company for independent advice and arrangement of the loan in Spain.

If the broker has introducer rather than independent status IVA at 16% will apply for their fee. Independent brokers are not required to charge IVA.

Costs for cash buyers

The biggest cost of buying in Spain is transfer tax for resales. Or IVA and stamp duty if the property is a new build, and the buyer is the first owner.

Resales

Transfer tax is set by each region and can vary considerably. Therefore the cost of purchase will be dictated by where the property is bought. For resales at present, August 2024, the highest transfer tax level is 10%. This is 10% of the net purchase price declared at Notary. The lowest is 6.1%.

Regions that charge 10% include Catalonia, Valencia and Costa Brava. At the lower end Madrid and the Canary Islands charge 6.1% and 6.5% respectively. Post Covid Andalucia dropped transfer tax levels to a set 7%. To date this has not been increased. Whilst it was originally a temporary measure.

Regions like Majorca will link percentage of the tax charged to a purchase price range. Starting at 8% below 400k and rising to 10% for properties over 750k.

If the buyer is using a Spanish mortgage to complete, the Bank is responsible for retaining the funds to cover the transfer tax.

New builds

For all new builds, IVA the Spanish equivalent of VAT is payable. This is always 10% except in the Canary Islands where a lower level applies. This is a tax Northern American buyers from the US will not be used to. Most other countries have a value added tax on luxuries so conceptually will understand it.

On top of IVA buyers also have to pay Stamp Duty tax on all new builds. This will vary from region to region. The cost ranges from 0.50% of purchase price to 1.5%. In general the regions with highest transfer taxes also apply highest Stamp Duty taxes.

The notary is responsible for retaining the tax funds from the transaction and paying the government taxes due.

Notary and Land registry fees for purchase deeds.

Whilst if a buyer contracts a mortgage in Spain the mortgage deed is picked up by the lender. The purchase deed is payable by the buyer.

Purchase deed costs can vary from Notary to Notary but there is a set range. The Notary always charges a percentage of the purchase price. In addition Land Registry charges for the purchase deed are payable.

In total a buyer can expect to pay between 1% to 1.5% of purchase price to cover the Notray and land registry charges.

Lawyer fees

Whilst a Notary office will oversee a property transfer from one owner to another they do not work on behalf of the buyer. Nor do they have any legal obligations to the buyer. Their sole role is to ensure the transaction and relevant paperwork meet Spanish legal requirements, plus 16% IVA.

It is therefore sensible when buying in Spain to appoint a lawyer to work on your behalf. Solely to protect your interests.

Most Lawyers or Abogados will charge around 1% of the purchase price plus 16% IVA. They will check title of the property. Ensure there are no liens and negotiate the purchase contract on your behalf. Also ensure to completion any deposit monies are protected.

If a buyer is arranging a mortgage in Spain the Lawyer may also charge a fee for managing the mortgage deed. Particularly if they are signing at Notary by way of POA.

Power of Attorney

Passing a POA for signing a purchase and a loan in Spain, if you are not resident, can be helpful. If there is no POA you must attend Notary as the buyer. This can cause issues on day of signing if the Notary does not feel you understand the documents, which will be in Spanish. Most Notary offices will insist that an interpreter is present, unless the buyer themselves are fluent in Spanish.

Also completion days are notoriously open to delays. If the any of the required paperwork is missing, if the notary is unhappy with any aspect they can refuse to sign on that day. Therefore if travel plans have been made to attend day of completion, it may be a waste of time if the completion day has to be postponed. Prior to signing if a mortgage is being sed for the purchase, the signatory also must attend no less than 48 hours before to demonstrate to the notary their understanding of the mortgage deed.

Powers of Attorney can help remove these issues. However they will also have their costs. POA must be issued by a Notary office and fees will apply.

Other costs

Other small incidental costs like NIE certificates are payable. If obtained directly by the buyer the cost is minimal. However they must attend the police station in person and revisit to pick the certificate up. A lawyer can via POA obtain NIE certificates also.

Average costs of buying in Spain

If buying cash and depending on region, also type of purchase, then purchase costs will be in region of 10% to 13% of purchase price. If buying with a mortgage these will be closer to 11% to 15% of purchase price.

Costs of purchase cannot be added to any Mortgage in Spain if maximum loan to values are being contracted.