Buying a Property in The Orihuela Costa (or other parts of the Costa Blanca).
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Buying a new property anywhere can be an exciting mix of joy, fear, being overwhelmed and calm, but it is usually an experience that people never forget. Buying a property on the Orihuela Costa, the Costa Blanca and the other autonomous regions of Spain comes with it's own unique sets of rules, some very clear, some as clear as mud.Taxes are a plentiful:- purchase and sales tax, wealth tax (if you aren't a resident), suma (council tax) and community tax (community fees if you live in an urbanisation), all have to be paid and sometimes you really need to be clear about what is what and why you need to be paying it. Whether you are buying a New Build (off plan) property, an existing property from an owner (resale) or commercial property, make sure that you get as much information as you can, as clearly as you can.
If you are looking for a Spanish mortgage (hippoteca), you need to be aware that you pay a fee to get a mortgage in Spain and there are also other factiors to consider including interest rate types, insurance tie-ins, declared value versus actual value and many more incidences that you need to know about.
The best way to get through this minefield is to get a good, trustworthy Solicitor, who totally understands the Spanish system and explains it to you in terms that you totally understand (and preferrably someone who has been recommended, by a preson who had used them and had a positive experience).
If you are going through a realty (estate agency) company, make sure that they have a good reputation and again, if you know someone who has had a good and pleasant purchase or selling experience, then even better.
What You Need.
In order to purchase a property in Spain, you will need the following:-
N.I.E. (Numero Identificace de Extrajernos)
A Spanish Bank Account (utilities, taxes, etc)
A (trustworthy) Solicitor (Abogado)
Identification ( Passport, Identity card etc)
Please note that a certificate of Residencia is not an accepted form of inentification.
Fees.
You will need more than the value of the house for the other incurred fees, approx. 10-14% of the value of the house, ON TOP of the valued cost, for fees such as:-
Solicitor
Estate Agent
Money for set up fees (if applying for a Spanish mortgage)
Notary Fees
Purchase (or sales) Tax
Stamp Duty
Land Registry
Anything else that can be thought up
If applying for a Spanish Mortgage:-
3 last payslips
Fees for mortgage set up
Remember the Annual fees too.
Whether you are moving to Spain, buying an investment property or a holiday home, there are other fees, that in reality you should expect, like electricity, gas, community tax, suma (Council Tax), insurances ( life, buildingd, home & contents), telephone, internet (if you have them), television packages etc..
These can all add up to be quite costly and the providers in Spain can be slow to contact you, re-connect you or actually connect you in the first place, particularly on the Orihuela Costa, where the infrastructure isn't at it's greatest.
As a rough guess-timate you should have around 1500.00 - 1800.00€ as you annual amount to cover these, particularly as prices have soared (without explaination) recently.
Be Aware Of....
Some Banks insist that you take their life insurance, in order to get a mortgage (Spanish Mortgage).
In some instances, this is way over the normal price and in some cases, the Bank will award itself a 10 year, paid up-front fee, which is then financed and added onto your mortgage (i.e. you pay interest on it).
Even though the life cover would run out after the 10 years, you may be left paying the financed loan back over the term of the mortgage, vastly increasing the costs incurred to yourself. Remember you will still have to purchase life insurance after the 10 year period has ended, AS WELL AS the payments on the mortgaged cover.
ALWAYS ask what your options are and make sure that you can shop around, or have the option to pay the insurance, separately without it being financed.
Get advice from your Solicitor and make sure that the Banks give you clear and concise answers to your questions. This is viewed as very bad practice, but sadly isn't illegal.
Interest Rates. (Euribor versus IRPH)
There are 2 types of interest rate in Spain:-
THE EURIBOR - Set by the European Central Bank and is the standard for most mortgage interest rates...
IRPH - Índices de Referencia de Préstamos Hipotecarios.
There are varying schhols of thought with this, as the IRPH, is theoretically an average of all of the Spanish Banks and is therefore less suseptible to wild fluctuations, both upward and downward, BUT; it is consistently higher than the Euribor.
When applying for a Spanish mortgage, make sure that the Banks explain this to you, IN DETAIL and clearly, or else you may be paying way too much for your mortgage interest rates and the rates of IRPH are fixed at your mortgage review for A YEAR, so if your mortgage is an IRPH interest rate, consider carefully if you want to go ahead with it, as this is tha rate usually offered to ex-pats.
You may be better off trying to get a mortgage in your own Country. It could save you a large amount of money in the long run.
In Spain, any debts acumulated by a person can be linked to the property, not the person.
It is critical that you make sure that the property you are about to buy has no outstanding debts attached to it.
If it does and you complete the purchase, you will be liable to pay the debts, not the seller, as you are now the property owner.
Ask your Estate Agent or Solicitor to make sure that the property is free of any debt.
Most companies make sure of this as a matter of rule, but as the potential buyer, it is in your best interests to make sure yourself by asking.
Remember that most property on the Orihuela Costa and, indeed the Costa Blanca is sold furnished. You may quite possibly not want the furniture, as much of it has been purchased as furniture packs and isn't of the geatest quality or provide the best levels of comfort.
There are companies who will come and take it all away, should you not want it, offering you a small amount of money for the service and of course, the furniture. For the small amount of income that you receive, it is generally worth it. You make some money, the furniture gets taken away, you do not have to do the work.
Terms that may be useful to you.
- Escitura - The title deeds
- Hipoteca - Mortgage
- Abogado - Solicitor
- Se Vende - For Sale
- Se Alquiler - To Rent
- Gestor Comercial - Mortgage Consultant at the Bank
- Vendido - Sold
- Suma - Taxes (for home, car etc)
- Notaria - Notary (official overseeing the purchase)
Make a Checklist.
These questions may include ( in no particular order):-
- How much will it cost me to set up a mortgage in Spain ?
- How much is my Suma each year ?
- How much is my Community fee each year ?
- Can I choose my own Solicitor ?
- How much are the fees on top of the purchase price of the property ?
- Does the Solicitor always represent both seller and purchaser and if so, why ?
- Are there life insurance tie-ins with the mortgage ?
- If so, what are my options in terms of choosing a company other that the mortgaging Bank ?
- If it is the Bank only, what are my payment options ?
- Why do some Banks award an advance payment of insurance and then finance it onto my mortgage ?
- If this happens, am I still making payments after the insurance term runs out ?
- What is the difference between Euribor & the higher IRPH interest rates ?
- I have been told that I am on the IRPH rate..why ?
- Do I need to be a resident to buy a property ?
- Is my new property debt free before my purchase is completed ?
Some people complete a house purchase in Spain with no problems whatsoever and have a smooth and satisfactory purchase, others find that they have to fork out more money than they have expected, are tied into insurances that were not explained to them thoroughly enough, or too quickly, or find that the house has debts attached that they are now liable for.
ALWAYS ASK and ALWAYS GET SATISFACTORY ANSWERS. LEAVE NOTHING TO CHANCE.
