Tapas Forever

Helping make the dream of moving to Spain a reality

Category: Real Estate

Buying Property In Spain: An Overview

If you’re on this page, chances are that you are looking for information on how to buy a property in Spain and are looking for more information. You’re in luck! I recently went through the process of buying a property here in Valencia and have documented the entire process.

This information has been split into a series of posts, each of which will give you more information on each part of the process. To find out how to buy your dream property in Spain, please refer to the following posts:

  1. Many home buyers in Spain use a mortgage to help finance their property – Spanish banks will usually even lend to non-residents. It’s usually a good idea to obtain a pre-approval on a mortgage of a mortgage broker before starting your search – How To Get A Mortgage In Spain
  2. Next you’ll likely want to do a search to identify which properties you are interested in – Searching For A Property In Spain
  3. Stay tuned for more in this series soon!

If you have any specific questions regarding buying a property in Spain then please contact me directly, and leave a comment here and I’ll get back to you shorty.

Buying A Property In Spain: Obtaining A Mortgage

If you’re able to finance the entire purchase of a property in cash then you are ready to make your offer. But most people nowadays typically engage a bank or a lender at this point to obtain a mortgage to finance a portion of their property purchase in Spain.

The mortgage system in general here in Spain is quite a bit different than back home. Unlike in Canada where most mortgages are amortized over a longer period (such as 25 years), but are renewable every five years, most Spanish mortgages are fixed for the entire term. What that means is a person can get a mortgage here for a certain interest rate, say 2.5% interest, fixed over the entire 20 year term – that’s as close to free money as you’ll find nowadays in my opinion, without the risk of interest rates changing while you own your home.

When I first started talking to banks about getting a mortgage, I realized that with my limited Spanish and short bank history the process was likely to be a bit difficult. My own bank, BBVA, looked over all my documents and basically said they’d call me back at some point. But other than an initial indication of the offer they might be willing to extend to me, never followed up with me after I expressed interest. Shortly afterwards BBVA changed their lending rules to make it harder to non-residents to obtain a mortgage here, so I didn’t pursue that avenue any further.

Thankfully there are mortgage brokers here in Spain that can work in English and generally have good contacts at the banks. If you haven’t heard of a mortgage broker before, essentially they are experts in obtaining mortgages, and often get preferential rates since they do most of the vetting on their side and also send a lot of volume to the banks.

One difference though is that unlike in Canada, where the bank pays a finder’s fee to a mortgage broker directly (essentially making the service free for the purchaser), here in Spain you often pay the mortgage broker for their services. While the costs for a mortgage broker generally vary, in my case I was presented with an initial scenario that my broker said they would be able to get me from one of their banks. At that point I was asked to pay €495 to formally secure the mortgage, with the caveat that if they couldn’t officially obtain a mortgage that was the same or better than their initial scenario, it would be refunded. So I said sure.

When the offers came in, I initially had two different ones from two competing banks: 25 years, 2.9%, 70% down, or 20 years, 2.15%, and 60% down. As a non-resident (from a tax perspective at least, which I still am), typically the most you can obtain for a mortgage is about a 60% loan to value ratio (LTV). Residents can usually get 70-80%, but since I likely won’t be a fiscal resident for another few years, I wasn’t able to get 80%. The 70% was actually appealing, but the documentation required for that one likely involved me visiting the consulate here and authenticating some documents, which seemed like a huge hassle (with various unknowns).

As part of the mortgage broker agreement, once you choose to move forward with a mortgage, you need to pay an additional fee, in my case a final €1,000. Obviously the combined total isn’t cheap, especially when taken in the context of the overall cost of the property, but you really need to keep everything in perspective. First, I might not have even been able to obtain a mortgage on my own, which means I wouldn’t be able to even buy a property. Second, having someone handle the entire process while I was busy working was a huge relief. Third, the rates I obtained were far better than I would have been able to get on my own. I know a few friends of mine here who obtained mortgages through their banks and were given rates of around 2.9%: that difference alone, 0.75%, amounts to roughly €9,100 of interest over the life of the mortgage, so more than enough to make up for the €1,400 or so I spent.

While technically you don’t need to have a mortgage arranged before making an offer on a property, it will make the negotiation process (and subsequent closing) much easier if you do. So it’s probably a good idea to approach your bank or to engage a mortgage broker to obtain a pre-approval before you make an offer. You can certainly add a clause into the contract saying it’s dependent on you obtaining a mortgage, but to be honest it’s a bit of a bad deal for the seller since they are basically taking their property off for a month or two for your benefit alone. So many sellers will simply decline any contract with that clause in it. My advice is to make sure you can obtain a mortgage before you get that far.

If you are looking for a great mortgage broker in Spain, I highly recommend Mortgage Direct SL – they were absolutely great to work with, and obtained two pre-approval offers for me.

Once you know you are set with a mortgage, it’s time to put in the official offer. The next post in this series will deal with that, so stay tuned.

Buying A Property in Spain: The Search

For those of my friends that follow me online, you may have noticed that I’m currently in the process of buying a flat here in Valencia. While the process isn’t quite over yet, I wanted to give people information on everything that is involved here. I’ll break this out into a multi-part series, the first part of which is this one: how to find a property in Spain.

Looking For A Property

If you’re starting out in a search for a property, chances are you are already looking at some of the more popular real estate websites such as idealista.es or fotocasa.es. For the most part, those are the two websites I used the most when I started searching.

Another good tip for people to find a property is to walk around the neighbourhood they are interested in and simple scan all the windows looking for “for sale” signs. Many older people likely don’t think of using the internet or an agency for their properties, so you may end up with a good deal if you do spot a private sale only listed privately in a window.

Differences Compared To Back Home

The Spanish property market differs in many ways compared to the Canadian one. For example, agents here in Valencia typically represent the seller, and when you engage an agent you typically can only see the properties they have in their collection. So that means if you want to see another property that isn’t in a particular agency’s collection, you need to contact the agency representing that property. The last part is a bit tricky as well, since agents aren’t exclusive here – it means multiple agencies can list the same property at the same time, and whoever shows the property and closes the sale will get the commission.

One of the inherent problems that creates is that every agency will make you sign a document basically agreeing that they will get the commission if you buy that property – so once you sign it, make sure you in fact do buy that property with that particular agency, otherwise you may end up paying commission twice.

While in many parts of Spain the seller pays for the entirety of the agency’s commission, in some other parts of Spain (like Valencia) the commission is actually split between the buyer and seller. That may be a bit shocking, but the argument could be made that the buyer is paying the commission in both cases since the price likely reflects the commission that needs to be paid as well.

Often the document you will sign to visit an apartment (here in Valencia at least) will state the agreed upon commission rate, typically on the order of 3% of the purchase price. If you don’t sign the document then you likely won’t get to visit the apartment, so really the agencies have all the power at this point. While I’ve been told you can negotiate those rates lower, you really don’t have any leverage to do so at the beginning, since you haven’t made an offer and are not in the process of making one.

In my case I was ‘lucky’ in that the property I was interested in was a private sale, so both the seller and myself didn’t have to pay any agency fees. My end of that would have amounted to roughly €5,200, so it’s not exactly chump change.

Once you find a property that you like, the next steps are to make sure you can obtain a mortgage for it (if required), and then make an offer.

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