Off-Plan Property Buying Guide Spain
What you need to know
Buying an off-plan property in Spain?
Buying off-plan in Spain is popular, but there are a few differences you need to be aware of before committing to a purchase.
In this help guide, we will cover the purchase process, legal checks and what you need to know about getting financing on an off-plan property in Spain.
Quick check list for buying an off-plan property
Check there is a bank guarantee
Instruct an independent lawyer
Only reserve a property with a refundable deposit
Check you qualify for a mortgage before buying
Check the developer’s reputation
Expect delays
What is the purchase process?
1. Reservation
Before committing to any purchase in Spain, you should always reserve the property subject to your legal checks.
A typical reservation on an off-plan property is 3,000 Euros, but with properties above 500,000 Euros this may be higher.
The reservation agreement should be negotiated by your own independent lawyer, to ensure you deposit is protected until you are happy with all the purchase terms.
2. Private Purchase
The private purchase agreement is a contract you will sign once you are happy with the terms of the purchase and the developer has all the relevant paperwork (see legal section) to ensure your property will be built and be habitable.
Once you have signed the private purchase you will be locked into the purchase of the property and will be liable for the stage payment to complete the purchase, so it is also advisable that you have spoken with a Spanish bank or broker about your financial situation and your eligibility to borrow any funds you may need to complete the purchase (see financial section).
3. Stage Payments
Developers will have their owns terms of payments, and it is down to you and your lawyer to ensure you are happy with the agreed terms and are capable of meeting those payments.
The below is an example of the stage payments for a typical purchase:
Reservation deposit
20% paid at private purchase (Arras)
10% paid at an agreed date
70% on completion
4. Completion
Completing your purchase will require a visit to Spain, unless your legal representative has power of attorney to represent you in the purchase.
The purchase contract will be signed in a public notary. If you are using a mortgage to purchase, then the bank will produce the checks and send a representative along with the mortgage contracts. Any payments due on the property will have to be made on the day to complete the purchase.
5. Tax
The tax is the same for all new build property purchases in Spain. 10% of the purchase price.
With each payment you make during the purchase process the tax will be applied at each step.
Mortgage, getting finance for an off-plan purchase
How much can I borrow?
If you pay your taxes outside of Spain then the maximum you can borrow is 70% of the purchase or valuation price.
If you pay your taxes in Spain then you can borrow up to 80%
How does the bank evaluate my ability to borrow?
The bank will look at your last 2 tax returns and calculate your debt to income ratio.
You can use 35% of your monthly net income (after-tax) to service all worldwide loans, including the new mortgage you are undertaking in Spain.
For example, if you earn 10,000 per month (net) then you can use 3,500 to service all your loans.
If you have any further questions about this equation please contact one of the mortgage team.
What documents do I need to provide?
- Copies of your Passport / NIE (for all parties that will be on the mortgage)
- Tax declarations (2 years)
- 3 most recent – Payslips
- 6 months – Bank Statements
- Employment contract if employed
- Credit report (If applicable to your country)
- Nota simple – Details of the property you are buying
- Self Employed? – Self Assessment Form SA302 (UK only)
- Other Property – If you own a property with a tenant, banks will require a copy of that rental contract & proof of income from the property.
Can I get a mortgage in principle?
When you buy off-plan, you can still get a mortgage in principle to ensure before buying that you are in a position to complete the purchase. As long as your financial situation does not drastically change during the time prior to purchase then you should still qualify for the loan.
Legal checks, what your lawyer should do on your behalf
- Check the title/ownership of the land
- Check that the property has all the relevant licences
- Check the relevant civil insurances
- Carry out research on the construction company
- Complete and/or check the private contract detailing the terms and conditions of the sale of the property
- Complete purchase before a public notary, either on your behalf or with you in person
- Register/Check cadastral
- Check cadastral and land registry for any discrepancies
- Tax Registration
- Check for debts or sanctions against the developer or the land
Need more help? speak with one of the team
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