Financial considerations for mortgages in Spain

Spanish Mortgages

For those looking to purchase a property outside the United Kingdom, Spain is still a firm favourite. A huge volume of holidaymakers head for Spain every year and it is generally considered to be a safe and well-trodden route.

Financial Considerations

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Other Financial Issues - The Basics
On top of the actual purchase price of a Spanish property, there are additional costs which have to be met before, during and immediately after completion. In some cases, payments will be due before the property can be formally transferred and these must be met before the bank is prepared to forward the mortgage money.

Additional Buying Costs
As with most property purchases, tax is one of the main additional costs that have to be taken into consideration. Unusually, in Spain, the amount of tax payable depends on the type of seller and on the region where the property is located.

For a property being sold by a private individual, the amount of tax due is normally 6 percent, although some regions levy 7 percent. When purchasing from a developer and it is the first time that the building or land has been sold on, then it will be necessary to pay VAT. This is at a rate of 7 percent for housing and a massive 16 percent for any property or land that is not considered as housing.

Sellers will also have to pay a tax which is known as the plusvalia. Although this may not be an issue for those who are buying the property, it is a worthwhile consideration when it comes to reselling the property. This tax depends on how long the property has been held and on the actual location. Therefore, the individual City Hall should be able to tell you the exact amount payable.

As well as paying the taxes, you will have to pay to have the property registered in your name. This is an essential stage if you are relying on a mortgage and highly advisable even if not, as it is the only way that you can make sure that your rights to the property are unequivocally protected. The charges for making this registration are currently 4 percent for the first 6,010 euros and .02 percent for any amount over 6,010 euros.

When arranging a mortgage, it is common practice for the lender to charge an opening or arrangement fee for setting up the mortgage. Unlike in the UK, there are very few mortgage providers that offer fees-free mortgages. Therefore, it is essential that you budget for these fees when arranging a mortgage through a Spanish bank. Fees do vary considerably, from as little as 0.5 percent of the sale value to as much as 2 percent of the value, so make sure that you find out the level of fees that you are expected to pay.

Summary
Bullet Point In addition to the actual purchase price, there are other incidental costs which must be considered;
Bullet Point one of the largest extra costs is always likely to be tax and in Spain the rate is variable, depending on who the seller is and where the property is located;
Bullet Point other incidental costs include registration fees and arrangement fees for the mortgage itself;
Bullet Point always include these additional costs when calculating the total budget required to complete your purchase.

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