Guide to buying property in Spain - budget and finance
What can you afford to spend on a property?
It would be a mistake to look for property valued at the total amount of money you have to spend. The actual cost of any property you purchase will be 10-12% more than the sale price. You can see the approximate costs involved in all purchases of Spanish property on our costs page.
If you intend to get a mortgage to finance your Spanish property purchase, there will be additional costs incurred including property valuation and mortgage application fees. See our mortgages page for advice on this aspect.
You will also need to take into account the cost of furnishing your new property or transporting existing furniture, either of which will be expensive. Remember also to allow for the cost of inspection visits and subsequent visits to complete documents.
Arrange the finance before proceeding.
In the UK it is common practice to put an offer on a property subject to your own property being sold. This does not normally happen in Spain. When you place an offer and it is accepted, you will usually be required to pay a non-refundable deposit. If you are unable to complete the sale, you will lose the deposit you have paid. There are some exceptions to this, and you need to discuss the issues with your lawyer before paying a deposit.
Another thing to keep in mind is that you will be responsible for paying fees and taxes on your new property. IBI is a municipal tax that is charged annually. You could find that you need to pay this very soon after you have become the owner. You may also have to pay for water, rubbish and community fees. Standing charges for mains electricity and gas may also apply.
If you intend to pay all or part of the costs of your new property using the money from the sale of your existing property, it is best to sell up and have the money in the bank before committing yourself to purchasing in Spain. Doing this has the added advantage that you will know exactly how much you have to spend (bear in mind that currency exchage factors can affect your overall budget. See our exchange page for more details) .
If you will be taking out a mortgage to finance or part-finance your purchase, make sure you have agreement in principle before proceeding. But remember that agreement in principle is just that - the lender may refuse the application when it comes to the crunch. This could happen if the property your are buying has not been properly registered, for example. You will need to show a sustainable income source to get mortgages from most lenders. See our mortgage information page.
Remember to factor in money transfer costs. You will need to discuss these with your home bank and your Spanish bank as both may charge transfer fees.