Things to consider with an overseas property purchase

Please be aware that the information presented below is only advisory. Taxes, legal charges and all matters affecting the purchase of a Spanish property are subject to Spanish and EU law and may change at any time.

You should always seek the advice of a solicitor before entering into a formal contract, or dealing with any other agency in connection with your overseas investment.

Before you can buy or sell property in Spain you need to have an NIE (Numero de Identificacion para Extranjeros). This is an ID number and it is available to residents and non residents of Spain.

Financing your Galician property purchase

Financing (obtaining a mortgage for) your Galician property

How you choose to finance your Galician property purchase will be dependent upon a number of factors that are personal to you and your financial circumstances.

The three basic options available are to buy for cash (i.e. no mortgage or loan), to arrange finance through a lending agency (bank or building society) in your own country, or to obtain a loan or mortgage abroad (usually in the country where the property is located).

If you require a loan or mortgage, you should investigate the available options in advance of any house hunting visit and certainly before you consider entering into a contract of sale. You will find specialist financial agents in the UK who can (for a fee or commission) do this for you.

Obtaining a mortgage on your Galician property

From your home country

You should initially contact your own bank or Building Society. Not all UK banks offer mortgages on foreign property investments, so you may need to shop around.

Abbey National are now owned by "Santander Central Hispano" (Spain’s largest bank) and are usually a good source for mortgages on Spanish property. Barclays bank are also very well represented in Spain and offer good overseas mortgage terms and you can also check out Nat West who have a number of Spanish mortgage options available.

From a Spanish lender

There are a number of reasons why it might be worth considering obtaining your mortgage from a Spanish bank.

• Firstly, interest rates in Spain tend to be lower than the UK and Eire, so you may save a considerable sum of money over the full term of the borrowing.
• Secondly, the money lending market in Spain is all too aware of the number of overseas property investors looking to buy in Spain. Competition between banks (and the services that they offer is high) and this can lead to excellent mortgage arrangements.
• Finally, if you plan to live in Galicia, or to move over at some future point in time (retirement), your finances may be easier to manage if based locally.

Spanish Banks

A number of Spanish banks will be keen to offer you a mortgage (subject to their terms and conditions). Most of these banks have bi-lingual staff to deal with foreign clients, so you should have little trouble initially communicating by email.

Here are 3 banks that you can contact to get an idea of what is available, but you can do an internet search and take your pick. Most lenders have an online form that you can complete for a "quick" response.

• Santander Central Hispano- link to their website (at the top of their page use the "drop down selector" to change the language to English).
• Bankinter – this is an e-bank.
• Caja Madrid - See this link - euroresidentes.com for some further information about this banks services.

Extra expenses

In addition to the obvious house price in euros, there will be some additional costs incurred in the purchase of any property in Galicia. In brief they are

• Taxes (to the "registro catastral") which you may consider as being similar to stamp duty in the UK (although they are more involved).
• The service of a notary ("notario"), the person responsible for producing the deeds, registering the new owners and collecting the taxes payable. The notary’s charges are based upon a fixed Spanish government schedule of fees.
• The appointment and services of an English speaking solicitor – always essential for any overseas property venture and normally charged at a rate of between 1% and 2% of the property sale value.
• In the case of a UK citizen (or other non EU citizen), changes in the exchange rate which could, in a protracted property sale process, save or cost you extra money.

Additional expenses in more detail

1. Taxes

The taxes that you will pay on you property purchase are dependant upon whether your house is a new build, or a re-sale property.

• If the property is either a new build or an off-plan development, then you will pay a 7% IVA tax (similar to VAT) plus an additional 0.5% stamp duty.
• If the property is a re-sale (i.e. it has been owned and occupied before), then you will pay a transfer tax which is 7%. (This tax goes to the "Impuesta de Transferenia Propiedad".)
• If you purchase either, a commercial property, or land for development, then the IVA (VAT) will be set at a higher rate of 16%.
• If you are contemplating selling a Spanish property, then you need to be aware that there is a capital gains tax payable on the value of the property sale.

  The value of this figure is dependant upon whether or not you have Spanish residency. If you do not, then it may be worth taking legal advice on the financial benefits of doing so. (There are some exceptions to the payment of this tax based on age and residency.)

How to budget for extra costs

As ever it is impossible to provide an accurate figure to add on top of the actual sale price of a property, but the generally agreed figure is about 10%. i.e. PROPERTY PRICE X 110% = ACTUAL property cost. Then you need furniture and everything else!

Important legal information

For information about the necessity and appointment of a solicitor and the legal implications of buying a house in Galicia, please click on this LEGAL INFORMATION page link.