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EXPLAINED: How buy a property with cash in Spain 

If you have the savings to pay for a Spanish property in one instalment without the need for a mortgage, here are ten key steps you’ll need to follow to complete the payment with cash quickly and successfully.

EXPLAINED: How buy a property with cash in Spain 
It will take less time to move into a property you've bought in Spain if you pay 'al contado'. Photo: Alexander Gresbek/Pixabay

Three in every ten homes in Spain are purchased up front without a loan from the bank.

It’s only an option for those with considerable savings available, and a decision which often depends on the price of the property, but there are several major advantages it offers.

Paying for a property al contado (up front in one instalment) is one of the best ways to negotiate down the price of a property as you offer better guarantees of solvency to the seller. 

It can also mean you save a huge amount you would otherwise pay in interest as a result of mortgage payments as well as fees and commission from other processes.

And there’s the fact that overall it will be faster to complete the purchase and move into your new Spanish home if there isn’t the need to wait for mortgage approvals from the bank.  

So if you’ve found a property in Spain that you like and you have the funds to pay for it, what are the steps you have to follow to complete the process properly and quickly? 

Get a gestor, and a bank account if you don’t have one 

Whether it’s a lawyer, an estate agent or a gestor, it’s advisable to have a professional helping you along with such an important process, especially if a lot or all of your savings are at stake here.

READ MORE: What does a gestor do in Spain and why you’ll need one

They will be able to advise you on the steps to follow, tell you what to watch out for and assist you with much of the process.

It’s also recommendable to get a Spanish bank account even though it’s not compulsory, as it will facilitate the payment of taxes and other expenses.     

READ ALSO: How to open a bank account in Spain if you’re not a resident

 

Get the escritura notarial 

This notarised house deed is the one that certifies that the person selling the property is indeed its rightful owner. You’ll have to request this from the seller and if they’ve lost it, they will have to get a copy from the notary who originally signed it. 

Get the nota simple 

This land registry certificate is crucial because it contains a full description of each property, what condition it’s in, who the legal owner is, when they bought it, any debts or legal charges against the property, defined use of the land, and any community costs for which prospective buyers would become liable.

This is all very important information you want to make sure you have before committing to such an important purchase.

You can request the nota simple in person at your closest land registry office, but note that it will only be available in Spanish and there should be a legitimate interest in buying the property.

If you’ve viewed the property through local estate agents, it’s also worth asking them if they can provide you with a copy. 

READ MORE: What is the ‘nota simple’ and why is it so important?

Check IBI payments 

IBI stands for Impuesto sobre Bienes Inmuebles in Spanish, which translates to tax on property goods, but it also goes by the name SUMA.

It’s a local tax which has to be paid once a year by all property owners in Spain, and it serves as a benchmark to calculate all other Spanish property-related taxes.

You must ensure that the property is up to date with payments by the homeowners’ association (la comunidad) and that the seller has paid their IBI. 

In order to find this out, you should request the last IBI receipt from the town hall where the property is located. Some municipalities offer this service online. 

READ ALSO: 

What property owners in Spain need to know about homeowners’ associations

How to pay less Spanish IBI property tax

Make a down payment and sign the contrato de arras 

In English contrato de arras translates to a deposit contract or deposit agreement and is an important, in most cases, essential, legal document to finalise an agreement for the purchase of a property in Spain.

In Spain, the deposit to pay to the seller when signing the contrato de arras is usually between 5 and 15 percent of the final agreed sale price, a sum that can only be cashed by the owner of the property being sold and which is deducted from the agreed property price.

The main purpose of an ‘arras‘ is to give peace of mind to all parties involved in a property sale, as the agreement contract confirms in writing that the terms agreed for the sale are respected.

When reading through a deposit contract, it’s important to pay attention that all the details of the purchase are included in writing, such as the deadline by which to formalise the operation before a notary, the agreed sale amount and the payment method.

READ MORE: What you need to know before making a down payment

Sign the contrato de compraventa 

Once you make the downpayment and have proof of it, you must sign the purchase contract with all the details about the house and the transaction. It’s the agreement between both parties in which all the details of the seller appear and in which the property is described.

Having the advice of a professional such as a gestor or a lawyer at this point is important as an extra precaution. 

Notarise the escritura pública 

In order to formalise the contract, you must have the public deed of sale notarised. 

This gives both the seller and the buyer legal security for the transfer of property and its new registration at the land registry. It’s not mandatory to sign the public deed of sale to buy a house, nor is it to register the property at the land registry, but it is highly recommended.

The escritura pública should include many of the details mentioned above such as any outstanding debts, IBI and comunidad payments, payment details and more. 

The notary will certify the authenticity of the information, give the buyer’s data to the cadastre, require the seller to provide mandatory documents such as the CEE (Energy Efficiency Certificate) and establish the distribution of expenses of the sale.

Once everything is in order and signed, this is when the buyer gets the keys to their new property, meaning that the seller must have moved out of the property before the public deed of sale.

Pay ITP tax

ITP is the acronym used to describe the tax that applies to the transfer of ownership of a second-hand property in Spain. 

It varies across Spain’s regions, ranging from 4 percent to 10 percent currently.

These tax rates can change every year but in general Madrid’s are among the lowest in Spain. If it’s a brand-new property, the buyer pays IVA (VAT).

ITP payment must be carried out at a tax agency in your region, city or town within 30 business days from when the contract was signed.

Register property

Once the sale has been completed, you must officially register the property in Spain’s Property Registry so that it appears in your name as the new owner after having purchased the home.

You will need a notarized copy of the public deed of sale, proof of ITP property transfer tax payment, proof of having presented the documentation for the payment of the municipal capital gains.

Again, this is not compulsory but it is highly recommended in order to have legal protection. 

Set up bills 

You’re ready to move into your new Spanish property but you’re going to need to put the water and electricity in your name in order to be able to actually live there. 

You can start by requesting these details from the previous owner, such as who the suppliers are, any reference numbers you may need such as the CUPS code for electricity and so on. Most of which will be available on previous bills. 

Once you have this information, you can call up to request the cambio de titular ( the change of ownership).

READ ALSO: The real costs of buying a home in Spain as a foreigner

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PROPERTY

What the Euribor rise means for property buyers and owners in Spain

The rise in the Euribor interest rate, used to calculate mortgage payments in Spain, is causing big changes in the mortgage rates.

What the Euribor rise means for property buyers and owners in Spain

Looking to buy property in Spain? Already a homeowner here? Well, you may have heard something about rising interest rates recently.

Or perhaps changes to the terms of your mortgage. Or the Euribor – but what is it, and what’s going on?

What is Euribor?

In Spain, Euribor is the interest rate most often used to work out mortgage payments and to calculate both variable and fixed rates.

It is anchored to the interest rate set by the European Central Bank, and, as we are now seeing, quite responsive to global economic events.

It’s the interest rate that banks in the Euro Zone use to lend to each other, so when the base rate goes up, the Euribor does too, which sends mortgage interest rates across the Eurozone rising. 

Rising rates

Most Spanish mortgages with variable rates normally vary based on a variety of factors, but this number has been rising and in May 2022 saw figures of 0.240 percent (Tuesday May 17th), well above the average. 

The rises throughout May are leading many in Spain, and indeed across Europe, to wonder how high their mortgage rates can go, and when the rises will stop.

Banco de España has estimated that the increases could range from anything between €35 a month to an additional €400. Bankinter predicts the Euribor rate will finish the year at a staggering 0.40 percent, but, more encouragingly, Caixabank’s prediction puts it at just 0.13 percent by the end of 2022.

On Euribor.com.es, a website that tracks the index on a daily basis, they suggest that the market consensus predicts the Euribor will finish at around 0.3 percent at the end of the year, but could reach as high 0.8 percent in 2023.

All of them agree, and most other economic indicators suggest, that whatever the figure at the end of the year, it will remain positive, so it seems almost certain that mortgages will continue to rise throughout 2022 at the very least.

This instability, in addition to global inflation and supply chain problems, could mean that mortgage rates will be affected at least until 2023, with some predictors even signposting 2024 as the possible end of a rise in mortgage prices.

With things uncertain in the mortgage industry, and the world economy more broadly, perhaps you’re thinking of ways to try and insulate yourself from the climbing interest rates.

How to protect yourself from the rising rates

One way to weather the storm of interest rate increases is to change your mortgage from a variable to a fixed rate, either by negotiating with the your bank or by changing bank altogether – a process known as subrogation.

According to data from MyInvestor, during March and April the number of subrogations has started to rise.

Subrogation basically means switching the mortgage from one bank to another to change its interest rate. Although it does involve certain charges in order to do so – you pay the valuation of your house, which normally costs a few hundred euros, and a fee charged to the bank you are leaving, which can cost up to 2 percent of the outstanding amount – it could, and probably would, work out cheaper than paying the hiked interests rates over time.

You could also try and take out a new mortgage with another bank and use the borrowed money to settle the loan. This is, of course, a more expensive option as you have to pay the appraisal, the commission for early repayment of the current credit (again, up to 2 percent of the outstanding amount) and the expenses associated with its cancellation of registration, which normally runs to around €1,000.

READ ALSO: Spanish mortgages – Ten things foreigners should know before getting one

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