Written by Tina Irving for Elder Juice. Elder Juice has now been sold.
FINANCING YOUR PROPERTY IN SPAIN
Making the decision
Having decided that Spain is the ideal location for your retirement, new business enterprise or base for your new life, you will decide on a budget for your property. You should add 10% to this to cover legal costs and estate agents fees. You will also need to take into account currency fluctuations between the euro and the pound sterling and ensure that you remain within budget.
Once you have found the property of your dreams, you now need to source the finance unless you are lucky enough to have the cash in hand. Before you are even able to open a bank account, you will need your ‘Número Identidad de Extranjero’ (NIE) number which is a foreigner’s identification number. This is obtainable from the local police station (Comisaría de Policia) and is fundamental to life in Spain. You will need the relevant form from the police station, your passport, copy of your passport and four passport-sized photos. The fee varies as does the time it takes for the NIE to be processed, which can take longer in the summer months. The NIE is required for you to be able to pay the taxes on your property purchase and make the transaction with the seller. You will also need to find a reputable legal advisor or asesoria/gestor (conveyancer). The latter can help you in many ways, including obtaining the NIE number, ensuring that the title deeds are correct and organising the transfer into your name, and later helping with filing your Spanish tax returns. He / she will carry out the necessary searches for the property you are interested in and ensure that all is in order. You can request a “nota simple” which is an abbreviated version of the deed (escritura) from the land registry. This verifies that the vendor has the right to sell the property and that all taxes are up to date. Your estate agent can also obtain this for you and should in any case have a copy which should not be more than three months old.
Finding the finance
Spanish banks are the best source of finance, and, as in the UK, interest rates will vary. The loan to value (LTV) rate you will be able to raise will vary between financial institutions but most will lend …..% of the value of the property.
Despite Spain being in the European Union, it is expensive to raise finance in the UK to pay for a Spanish property given the current exchange rate against the euro although it can be done. The bank will organise a survey of the property concerned and once the application procedure is completed, you will be made an offer. If you do decide to raise a mortgage in Spain, it is recommended that you do not pay the deposit until it has been agreed, as the deposit is non-refundable unless you are lucky enough for the owner to agree that it should be written into the purchase contract.
You should be entirely sure that you can afford to purchase your property in the sun before taking the final steps. Many people in the 1980s mortgaged their family homes in the UK to raise the money to finance their dream and lost not only the UK property but the Spanish home as well as they could not maintain the payments.
Copyright: Tina Irving