# Questions about buying a property in Spain



## Expat Ben (Jul 28, 2009)

Hi again.

I understand that in Spain if you purchase a NEW property then you must pay IVA (VAT); but does the buyer need to pay IVA on a property that is second hand ?

I've seen property prices drop significantly in parts of the Costa del Sol, but the bank will only offer mortgages up to a maximum of 80% of the value of the property; either the valuation of the owner or the bank; whichever is lower.

So if a property has reduced in price by say 25% in the last 2 years, would the bank still only loan a maximum of 80% of the value as I've also come across properties being advertised as having 100% finance available ?

Is it also true that land is cheaper to buy in the South of Spain and that the prices of the properties are being fixed by the banks not the owners ?

Ben


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## jojo (Sep 20, 2007)

I think you have to pay IVA on a second hand property at a reduced rate, not sure what that is tho! I do know that whatever price you buy a property for in Spain you will pay at least 10% more in fees! Mortgages are extremely difficult to obtain in Spain at the mo, they are reluctant to give self certification mortgages or to give mortgages on anyone who has been here less that 2 years, but I'm sure if you hunt around, they could be found. But 100% on anything when prices here are still apparently falling would be near impossible to get IMO

Jo xxx


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## Xose (Dec 10, 2008)

Expat Ben said:


> Hi again.
> 
> I understand that in Spain if you purchase a NEW property then you must pay IVA (VAT); but does the buyer need to pay IVA on a property that is second hand ?
> 
> ...


Hi Ben,
The Impuesto de Transferencia is not VAT, but I believe it's 7% in any case, just like the VAT in a new property (and 8% from next June I believe)

You can reckon on 10%-11% of purchase price for the taxes, notario and the like.

The Tax is worked out by Hacienda on the value it is Escriturado for. Hardly ever the same as the Market value. As a guide, I would say that a 380K or so house would be Escriturada for about 250K or so. This will be similar to the valor catastral and on which rates and the like are based. Usually, if Hacienda's tables don't agree with what it's registered for, they send on a little present after the initial payment of the Tax - a top up to meet their table of values for that property in that area.... at which point you pay the diff between that already paid and what they say you should have paid.

As for the banks setting prices - well, twas ever thus in any country. If you need a mortgage, then their valuation (about 350€ or more) will dictate what they'll loan. This is nothing to do with what the property is on the market for as the vendor will decide what they will and what they won't let it go for. The fact that the bank will only loan 80% (70% for non residents was the guideline from Banco de Espana when I last looked for someone) is an additional headache as once again, this takes you even further from what the seller is willing to accept.

I remember this when the guy buying my house in the UK in 1992, argued that the bank had valued it at 20% below what I was asking. I told him that I was not willing to argue the bank's market risk assesment process with him and that the estate agents valuation stood. He ended up paying what I was asking (very close in fact) as I don't think he understod that Bank valuations in the negative credit housing market we were in had nothing to do with market value as at that precise moment. Obviously I was lucky he could go ahead with a less % mortgage than he was obviously hoping for.

All of the property valuations, as in any market, have a finite time value and what the market's done in the last two years is of little interest to the bank who will want to value now for a now mortgage (though as stated, their valuation will reflect current market trends V. the risk they are willing to take.... and of 80% MAX. mind you, you could find that if your finances are good and demonstrable, they will be happy to give you a 20% of the value personal loan - at a much higher percentage of course. 

Xose


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## grahunt (Jan 22, 2009)

*Taxes*

Tax is currently 7% on all transactions new or second hand (I think some autonomous communities still have 6% for new but in most it is definitely 7%) It is going up next July to 8% so that is something to bear in mind. Also VAT on all other costs goes up to 18% from 16% so if you see a bargain get it before July 2010.

Oh and banks will finance at 100% but only on their own repos. They want them off the books. Most banks are fiancing at 70-75% max of value on others' properties.


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## Expat Ben (Jul 28, 2009)

grahunt said:


> Tax is currently 7% on all transactions new or second hand (I think some autonomous communities still have 6% for new but in most it is definitely 7%) It is going up next July to 8% so that is something to bear in mind. Also VAT on all other costs goes up to 18% from 16% so if you see a bargain get it before July 2010.
> 
> Thank you and to the person that sent me a pm on this subject
> 
> ...


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## Suenneil (Feb 17, 2009)

Expat Ben said:


> grahunt said:
> 
> 
> > Tax is currently 7% on all transactions new or second hand (I think some autonomous communities still have 6% for new but in most it is definitely 7%) It is going up next July to 8% so that is something to bear in mind. Also VAT on all other costs goes up to 18% from 16% so if you see a bargain get it before July 2010.
> ...


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## Expat Ben (Jul 28, 2009)

Suenneil said:


> Expat Ben said:
> 
> 
> > Hi Ben
> ...


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## mrypg9 (Apr 26, 2008)

100% mortgages are a very bad thing, IMHO. If banks and other mortgage lenders had stayed with the old practice of lending 75% of the valuation we may have seen fewer repossessions. I've heard of lenders who give 150% mortgages and even higher....
In these days of devalued property assets, it's not safe to lend such a percentage or indeed to borrow.
That's just my general opinion and I'm sure Ben is well aware of all the risks and indeed benefits involved.


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## grahunt (Jan 22, 2009)

If you get a good deal on price from the bank and they finance 100% then there is little risk as long as you can afford the repayments even if interest rates go up. However don't expect too many good bank repos without having an enchufe. I have just written a blog post about this and have PM'd you with the url to have a look


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## mrypg9 (Apr 26, 2008)

Parker said:


> IN YOU CAN FIND A CHEAP ONE(THEY ARE EVERYWHERE) AND THE LAWYER WILL EXPLAIN TO YOU ALL THE LEGAL BITS.
> 
> Stilbaai Property


There is usually a good reason why goods are 'cheap' and it often applies to lawyers.


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## ARO (May 31, 2010)

If you want a plumber or electrician that speaks English. Don't ask an estate agent, You will end up with one of their mates. Try the local paper 'sur in english' and get a few quotes. so many people move country and leave their brains back in sunny UK then they winge that they have been ripped off. There are just as many cowboys here if not more. ie gas boiler installation- I know of British plumbers that are corgi (gas safe) registered, IN THE UK ONLY. It needs to be certified by someone with Spanish certification.


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## neilmac (Sep 10, 2008)

Expat Ben said:


> Hi again.
> 
> I understand that in Spain if you purchase a NEW property then you must pay IVA (VAT); but does the buyer need to pay IVA on a property that is second hand ?
> 
> ...


As regards the mortgage. When we purchased we were informed that we would be able to transfer our mortgage to a future purchaser. It would be worth while asking any owner you may wish to buy from if their mortgage allows such a transfer. Assuming it is not in arrears this could save a lot of hassle. I understand this was normal practice back then but I do not know what the current feeling is - maybe the banks are just happy if SOMEONE pays the mortgage?!


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## Jewel003 (May 24, 2010)

Xose said:


> The Impuesto de Transferencia is not VAT, but I believe it's 7% in any case, just like the VAT in a new property (and 8% from next June I believe)
> 
> You can reckon on 10%-11% of purchase price for the taxes, notario and the like.
> 
> Xose


 Does this mean I have to add the 7% impuesto de transferencia and the 10-11% of purchase price for taxes,notario, etc together ? 

iow = the total amount on top of the price of a house is 17-18% ? 

or is the 10-11% the total amount payable on top of the house price...?


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## JBODEN (Jul 10, 2009)

Jewel003 said:


> Does this mean I have to add the 7% impuesto de transferencia and the 10-11% of purchase price for taxes,notario, etc together ?
> 
> iow = the total amount on top of the price of a house is 17-18% ?
> 
> or is the 10-11% the total amount payable on top of the house price...?


10-11% is inclusive of the 7%


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## Jewel003 (May 24, 2010)

JBODEN said:


> 10-11% is inclusive of the 7%


thank you, very good to know


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## JBODEN (Jul 10, 2009)

does anyone know the notary fees scale for the purchase of property (new & second hand - if there is a difference)


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## JBODEN (Jul 10, 2009)

a breakdown of my purchase (completion due 11th June)
Purchase price Eu 50.000
7% tax Eu 3.500 (increasing to 8% from 01/07/2010)
Gestor Eu 1.044 incl. VAT
Land registry Eu 420
Notary Eu 780 (subject to confirmation)
Total fees Eu 5.744 approx. 11.5% of Purchase price (PP)
For a higher PP the add-on % should be less


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