Purchasing a property is a process: from the moment you decide to take the step until you can view the house as your home, there are quite a few stages to go through. And if you are buying a house abroad, it gets a little more complicated: due to language, differences in legislation...
So this article is for you, the foreigner who has decided to buy a house in Mallorca, Spain: a list with the basic steps you must follow to ensure you purchase the house of your dreams, and not the one of your nightmares.
On buying a house, you will need the help of an estate agent and a lawyer: the first helps you with the house and the second with legal issues. You may also require some translation.
1. The necessary documents: NIE
The
Número de Identificación de Extranjeros is necessary for undertaking any financial activity, such as buying a property. It will also be necessary to pay the taxes involved. To
apply for it you need only go to the Policía Nacional with a notary-approved passport copy.
Having your NIE at the time of purchasing a property is
compulsory. Another thing you should take into account is the option of
opening a bank account in Spain. A further step to consider is
opening a bank account in Spain.
It is not required by law but can be very helpful for setting the payment of bills and in obtaining financial support for the payment of the property.
2. Choosing the house
The step that brings a before and an after: until you haven't chosen it, you can't proceed with the rest of them. The other steps are bureaucratic and we can help you by explaining how they work but this is a step that
depends entirely on you. The choice of your preferred house. The house of your dreams.
Maybe the only thing we can do is tell you that at JS Properties we boast a broad catalogue through which you may begin the search for your future home.
3. Make sure everything is correct
This is part of choosing a property. You need to be sure that it is a good house. Just as you will be asking how old the piping in the building is, you should also ask about its legal situation.
It is recommended, even imperative, that a trusted lawyer (and with experience) make a legal
assessment of the property's legal circumstances: checking the
cédula de habitabilidad (inhabitability approval), energy efficiency certificate… Besides the legal aspects of the property, one must also be aware of any potential
financial ties or obligations it may be subject to.
4. Reserving the property
Once we have decided what house to buy and we are sure of our decisión (previous section), we should sign a contract, referred to as “
Contrato de arras”. This
private contract between the buyer and seller commits the latter to keeping the property – and its Price – in Exchange for a payment and statement of intention.
At this stage it is advisable to have a lawyer review the contract to ensure there are no mistakes within it.
5. Signing the deed of sale
Now that we have the house secured for our purchase, it is time to buy it and become its owners. Fortunately, this is the last step too.
The acquisition becomes official upon signing of the
Deed of Sale, called
Escritura de Compraventa, a public document issued by a notary. With this document we can then go and
register the house as our own in the Property Registry and become the owners of the new house.
Before carrying out this step we must be clear on the means of payment: either getting the money together or managing to get financing (mortgage), since we will need to pay it to the seller in exchange for the deeds.
6. Taxes and expenses of the purchase
At the point in which we buy the house, we will have a few once-off costs such as the notary's fee and those for the Property Registry.
The other
costs we will be facing during upon acquisition of the property are:
- Plusvalía Municipal: The municipal tax on the increase of the property's value, is to be paid within 30 working days of the contract's signing, in the town hall. This is to be paid by the seller except for in a few cases, although it is best to clear up this issue during prior negotiation.
- Impuesto sobre Transmisiones Patrimoniales: (Property Transfer Tax) varies according to the municipality and value of the property. This levy will be due for payment by the buyer, for one month after the transaction.
- IVA: (VAT) is only due in the case that the property is new and amounts to 10% of the home's value.
When required to pay the IVA tax on the purchase of a home, we will also have to pay the Stamp Duty tax, or
Impuesto Sobre Actos Jurídicos Documentados, in the amount of 1.2% .
Furthermore, the buyer will be expected to pay the IRPF (PAYE) or IRNR income taxes, but not the buyer.
7. Annual taxes relating to house ownership in Spain
Despite being a foreigner and the fact that hour house in Spain is a second home, there are a series of recurring
expenses to be taken into account:
- IBI: The real estate Property Tax is due once a year to the town hall, in an amount that depends on the property's land register value and the charge established by the town hall.
- IRNR: Impuesto sobre la Renta de No Residentes, is the foreigners' income tax, which will vary depending on the use of the property: whether it is for one's own enjoyment or its rental.
- Service suppliers: The water, power and gas bills partly depend on the extent of consumption, however also include fixed cost amounts that will be charged regardless of their use being zero.
These 7 steps are a summary of EVERYTHING you need to do when buying a house without with the aim of avoiding any problems. If you need any further information you can visit the
guide prepared by the registrar's college of Spain, which is more complete but also much longer and tedious.
