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Cost of Costa Blanca Property Whatever your price range there are purchase costs that have to be budgeted for. Click on Finances on the Main Menu to see all of the articles WowFactorSpain have put together about buying. These articles are designed to inform and help you make the right decisions on: finalizing your budget working out a payments schedule arranging a mortgage moving money from the UK to Spain safely and cheaply paying the right taxes Working out a Budget. When purchasing a property costing £100,000 there are costs in addition to the actual price of the house. They are detailed in the Tax article below, generally it is advisable to expect 10 to 12% in additional costs. So a property that you buy for £100,000 will actually cost you £110,000 to £112,000. Therefore, if your budget is £100,000 then you could be looking at properties up to £90,000. Buying New: The Basics Here is a run through of the stages of buying a new property in Spain. It's important to be clear on this process at an early stage and to know what to expect. Learning about reserving, deposits and contracts now, means that you can concentrate on finding the right property during your time in Spain. New Property Reserving When you have seen a property that you like, you can 'Reserve' it. This doesn't cost you anything it is simply a process whereby the builder takes that property off the market for 24hrs. You now have thinking time without losing the property if you decide it's the one for you. If you decide not to go ahead with this property then after 24hrs the reserve is removed and the property is available again. Deposit Once you have decided to go ahead with a purchase there will be a more formal reservation process where you will be required to pay a £2000 (€3000) deposit and initial forms will be filled in giving your information to the building company in order for them to draw up a sales contract between you and them. Payment Structure The payment structure, specified in your sales contract with the builder, depends on the stage of build that the property is at i.e. are you buying Off-Plan or a Key-In-Hand property. An Off-Plan payment structure could consist of 3 payments (10%, 30%, 60%) or 4 payments (4x25%) over the period of time it takes for the property to be finished and ready to be handed over by the builder. If you are buying a Key-In-Hand property then the payment schedule may only consist of your initial deposit and then the balance on completion in 4 to 6 weeks time. Completion You will be informed of the 'completion' date and then arrangements will be made for you to attend with the builders representative in order to sign all documentation in the presence of a Notary. You can give 'Power of Attorney' to your legal representative if you cannot attend. In any case your legal representative should explain the process and protect your interests throughout. Your After Sales PA can be with you through this process. Buying a Resale: The Basics Just like in the UK it is the norm that when you see a resale that you are interested in, the owner will not always be willing to take the property off the market until an offer has been agreed. ie; there is no reservation process with resales normally. Resales Offers Any offer you make will be communicated to the owner and they will either accept, decline or invite negotiations. Sales Contract Once an offer has been accepted by the vendor a Compra Venta (Sales Purchase) Contract is drawn up between the vendor and the purchaser. This contract specifies the deposit amount and the completion date. The deposit is 10% of the agreed price and completion usually takes place in 6 to 8 weeks. Browse our Resales  What makes up the 10% on top of the price? Additional costs of approx 10-12% should be budgeted for. These consist of: New Impuesto sobre de Valor Añadido (IVA) 7% of purchase price (VAT) Actos Jurídicos Documentados (AJD) 1% of purchase price (Stamp Duty) The remaining 2-3% is made up of: Plus Valia - tax on the increase in land value since last sold. utilities - water and electric contracts, meters and connections Notary costs Legal costs Registration at the Land registry The same costs need to be budgeted for with resale properties. The only difference is that instead of 7% IVA/VAT, there is an equivalent 7% tax called ITP charged Resale Impuesto a la Transferencia de Propiedades (ITP) of 7% (Transfer Tax) Actos Jurídicos Documentados (AJD) 1% (Stamp Duty) Plus Valia - tax on the increase in land value since last sold New utility contracts - water, electric and possibly gas connections Notary costs Legal costs Registration at the Land registry What Tax Will I Have to Pay? It is advisable once you own property in Spain to appoint a Gestoria. They are officially recognised financial representatives who can keep your paper work in order and ensure that all your taxes are paid annually. They are usually a great source of information when it comes to 'the system' in Spain. You qualify as a resident in Spain if you spend 183 days in any one calendar year in Spain.   Non-Residents Imputed Income Tax – this is an annual charge on an ‘imaginary’ rental income resulting purely by virtue of ownership of a property and this is charged as 0.5% of the catastral value of the property. (Catastral is a term used often for tax calculations - it is approximately 50% of the title deed value) Capital Gains Tax (CGT) 18% will be charged on any declared profit on a sale. Spanish Inheritance Tax and inheritance laws are complex, so we strongly recommend that you consult a local solicitor as soon as you purchase a property to ensure that your estate planning is protected by a separate Spanish Will. Residents Capital Gains Tax is payable on second homes in Spain(18% on declared profit)  plus you’ll be charged Income Tax on your world-wide income. A note of reassurance – Spain recognises international double taxation conventions to ensure that you only pay income tax on earnings and investments once (i.e. in one country)! What's a payment schedule for a new property? The standard payment schedule for a new property consists of a £2000 (approx €3000) holding deposit followed by 2 or 3 further payments. Perhaps 25% within 1 month, another 25% within 4 months and the final 50% (less the initial 3000 euro deposit) upon completion. Different builders have different payment schedules.         With certain builders a 30%/70% split is also possible. With key-in-hand properties it is usually possible to agree with the builders to a 10% deposit and 90% upon completion in 6 to 8 weeks. Spanish Mortgage Information WowFactorSpain  can offer a full range of  impartial financial  advice  including: organising finances before coming to Spain opening a Spanish bank account applying for a Spanish mortgage organising stage payments whilst you wait for property to sell in the UK Mortgage Amount and Term As a non-resident you are able to borrow up to 80% of the value of the Spanish property.  Mortgages are available for periods between 5 to 40 years or to the maximum age of 75 - whichever is sooner. Interest Rates Historically, Spanish interest rates have been considerably lower than those in other European countries (at least 1% lower than the UK Standard Variable Rate) Mortgage Types Generally Spanish Mortgages are arranged on a 'capital and interest' repayment basis (Repayment Mortgage) however, you may be able to apply for an interest only option or even a combination of both.  Mortgage Expenses You should budget for approximately a 3% cost if you utilise a mortgage to purchase a property. This includes Mortgage Deed Expenses, Tax, Registration, Valuation Reports and Bank Arrangement Fee. These costs can usually be added to the amount borrowed. Mortgage and Payment Schedule If you require a mortgage and you are buying a new property, your financing will need to fit the builders payment schedule. The BBVA bank currently offers a Stage Payment Loan, whereby you can raise the initial amount(s) against equity in a UK property through the UK arm of this Spanish bank. You then take a mortgage through the Spanish arm of the bank against the new Spanish property itself (once it is completed and can be valued) to cover the final payment (up to 80% in which case you can reduce the UK side of the loan, which may have been anything up to 50%). The beauty of this option is that if your equity is sufficient in your UK property, you can borrow the entire amount - and because it's through a Spanish bank, the interest rates are lower than those generally offered by the UK banks.   Contact us if you want to discuss how  you can finance a property in Spain.  Transferring your Money - Cheaply and Safely Whether you are purchasing a new or resale property at some point you will need to transfer money from your UK bank to Spain and you will need to buy Euros BEFORE you can make any purchases in Spain. In addition to this the exchange rate between the UK and Spain changes everyday so how will you know how many Pounds to exchange to get the right amount of Euros to Spain ? We have prepared a checklist to help you get the best deal when making international transfers. There are two exchange rates: Bank and Tourist rates. Base your calculations on the Bank rate as it is the rate used for Inter-bank transactions. The Tourist rate is what you would be given at a Bureau de Change or in a high street bank for smaller exchanges.  www.xe.com is a useful website for calculating currency exchanges. Open a Spanish bank account BEFORE you transfer any funds this means that your money goes to your account in Spain so you will know when it arrives rather than waiting to hear from a lawyer's or builder's office that your money has reached its destination safely. Setting up telephone or internet access to your Spanish account is very important. Don't open an account until you have decided who you are going to use to transfer your funds. There may be Bank Receipt charges if your Spanish bank does not have a partner agreement with your transfer company. Some transfer companies will guarantee no bank receipt charges. Do get exchange rate and commission cost information from your UK bank but make sure you ask them about charges that you may incur when your Euros reach your Spanish bank. Receipt charges can be surprisingly high when you are moving thousands. Currencies Direct and Moneycorp are two companies who specialise in international money transfers.  They both offer competitive rates and no commissions plus you can fix future exchange rates with them so that you can budget for your next payment without being at the mercy of exchange rate fluctuations. It is not as complicated as it sounds. British Citizens in Spain use these international money transfer companies regularly for receiving pension payments at the best rates. Talk to the money transfer companies; their Customer Services are very good at explaining clearly how this all works, what your best options would be and they are clear on what costs are involved. Do your homework - it may save you thousands.

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