17 March 2018
At Brilliant Real Estate we regularly receive e-mails from people who have got into trouble after purchasing a Spanish house. They ask me what to do, but in most cases it is already too late and they will have to take their loss.
If you are planning to buy a Spanish property, you will need to find out more about your financial possibilities. That, too, is part of the preparation and can prevent major disappointments or even financial problems. Can you buy a Spanish property?!
Unfortunately, it still happens that people come to Spain to see the homes they want without knowing how much they can actually spend. Often they still have to sell their current home or they have not yet consulted their own bank or there may be a possibility to take out an overvalue mortgage on the current home. This uncertainty may cause purchase problems.
Imagine that during your visit to Spain you will see a nice house that meets all your housing needs. Then, of course, you can book them for final purchase. If, however, you do not yet know whether it is all financially feasible, you run a high risk. The moment you conclude an agreement with the selling party, you will need to make an initial deposit of usually € 3,000, after which all documents of the relevant property will be checked by your lawyer. After approval, the actual purchase agreement is drawn up and upon signature, your first deposit must be supplemented to 10% of the purchase price.
In Spain there is no resolutive condition for the financing, so if you sign the purchase agreement it is important that you are sure that you can also pay the purchase price and the additional costs for the purchaser with the notarial transfer. If it later turns out that you are not getting it through financially and you need to dissolve the contract, you will lose everything that you have already paid up to that point.
This fine serves as compensation to the seller, who, after agreement with you as the buyer, has taken the property off the market. If the sale still does not take place, the seller must start again from the beginning of the publication in order to find a new buyer. Any previous applicants would then usually already have been dropped out or found another house because this house had been 'sold'.
Therefore, let us inform you well in advance about your personal financial situation, so that you know exactly what the (im)possibilities are. A feasibility test will give you a better picture of the price range within which you can go looking. It is also a good idea to decide for yourself what kind of mortgage will be most beneficial to you: an overvalued mortgage possibly combined with a mortgage from a Spanish bank or a full mortgage from a Spanish bank, taking into account that they only provide a mortgage of up to 70%. You may not need to take out a mortgage at all, but even then it is important to know 'how high you can jump'.
When calculating your finances, also take into account the costs of the buyer. The price is only the basis, but on top of that there are additional amounts such as the ITP (transfer tax for existing houses) or IVA (VAT on new buildings), notary fees, registration fees and possibly the costs for a lawyer. All in all, this can amount to about 13 to 14% of the purchase price if you take out a mortgage.
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