In the province of Alicante, 49,858 properties were sold in 2022, and more than 40% of the buyers were foreigners (data from the INE).
If you have also decided to purchase a property in Spain, here are the steps to follow...
To start this post, we would like to recommend that for the property search to be more effective, organized, and simple, you use the services of a professional real estate agent. This person will be able to advise you best on the areas to live or the available opportunities, based on the criteria of your search, and will be responsible for verifying that all the documentation of the property is in order (a task that, in other countries, is the responsibility of the notary).
About the procedures...
Once you have found the property you wish to purchase and have clear the financing method you will use, to formalize the purchase, the first thing you must do is obtain your Foreigner Identification Number (NIE).
The NIE is a unique and personal number that will identify you as a foreigner and will be essential for carrying out any type of economic operation or procedure before the authorities of Spain, from opening a bank account, contracting services, paying taxes, opening a business, and even buying and selling a car or a property.
It is issued by the Ministry of the Interior and you can apply for it at the Police Station of the place where you choose to buy the property, grant power of attorney to a representative in Spain to manage it on your behalf, or go to the Spanish Consular Offices in your country of origin.
The NIE is issued in the form of a certificate printed on paper without a photograph and is not a visa or residence permit. Additionally, by itself, it does not imply the local or fiscal residence of its holder.
You can find the details of the procedure here: https://bit.ly/3NNJu50
It is advisable to open a bank account in Spain, either to domicile the payment of taxes and fees associated with the property that must be paid in the country, such as the payment of utility bills (water, electricity, gas, etc.), or to transfer the amount necessary to purchase the property from your country of origin to Spain. But, if you are a European citizen, you can domicile your bills in your usual account in your country of origin because banking at the level of the European community is integrated with the IBAN code.
About taxes...
On the other hand, you should know that, every year, you will have to pay the Non-Resident Income Tax (IRNR), which is a direct tax that taxes the income obtained in Spanish territory by individuals and legal entities not resident in Spain, or the Personal Income Tax (IRPF) if your habitual residence is in the country. That is, if you spend 183 days or more a year in Spain.
If you are not a resident in Spain, in some cases and depending on the country where you reside, you may require a fiscal representative (friend, family member, lawyer...).
You will also pay a tax called Property Tax (IBI) and a waste collection fee corresponding to the property(ies) you have acquired, the amount of which depends on the municipality where the property is located and the value of the property.
About financing…
Spanish banks offer financing to non-resident foreigners in Spain. There are also mortgages designed exclusively for them. Usually, the maximum financing for this type of loan for a second home is 70% of the valuation value (valuation of the real estate prepared by a specialized entity) or 80% in the case of a first home, for buyers from the European economic community, for other countries, it must be consulted with the banking entities.
This means that you have to have a minimum of 20% of the price of the property available, plus an extra 13 to 15% on the cost of the property to pay taxes, lawyer fees, notary fees, etc.
In addition, your indebtedness cannot exceed 30-35% of your income.
Other important details to consider are that, usually, in Spain mortgages are contracted for a minimum of five years and a maximum of thirty, with 75 years as the maximum age to finish the mortgage. It should also be noted that each entity has its own risk criteria, which may include the country of residence, and that properties abroad are usually not accepted as collateral, as they are difficult to access.
Our advice for you is as follows:
- Surround yourself with professionals who guide you through the search and purchase process
- Look for financing that suits your needs
- Carefully analyze the property
- Make sure you understand the contract
- Complete the necessary procedures to formalize the operation, rely on your agent
- Make sure to comply with the payment of your taxes or other obligations
Do you have questions? Get in touch with us by filling out our form or call us at the phone numbers you will find here.