In Spain the purchase costs in, case of a mortgage, are definitely different than in most European countries.
Besides the well known purchase costs, related to the property, of proximally 13%, Spain has some extra costs concerning the mortgage and the mortgage deed.
In total, these costs related to the mortgage can be calculated at proximally 4 to 5% of the purchase price.
Conclusion: When buying with the help of a mortgage 16-18% should be calculated on top of the purchase price in order to be safe and not sorry. These percentages do not apply for cheaper properties or small mortgages as some of the costs, set up fee, notary, etc., will be based on minimum charges.
These costs for a mortgage are:
- Valuation costs
- Bank opening fee, anywhere between 0.5 and 2 %
- Notary costs for the mortgage deed
- Register costs mortgage deed
- Mortgage tax (not known abroad)
- Bank solicitor
- House insurance (obligated by law)
- Spanish Link fee
- In some cases the requires a special capital Life insurance
Provision of Funds
Spanish Link will calculate for each individual case an amount needed for all the costs related to the purchase (Incl. the purchase costs to be paid for the purchase of the property). The applicant/purchaser will have to deposit these funds at the bank where the application is made, on an account in his/her name. In case that the mortgage is not supplied finally, for whatever reason, these funds will stay the property of the applicant minus the valuation costs, paid to the valuator and a part of the fee for Spanish Link (usually 250€).
Procedure when purchasing with the help of a mortgage
When purchasing with a mortgage the procedure is slightly different from when buying without one. In all these underneath described points Spanish Link will guide you and keep the initiative. You just sit back and relax.
- First there has to be made a valuation of the be bought property, as all mortgages are decided by the value of the property/collateral.
- As most banks will not go higher than 60 to 70% of the value of the property. The valuation is therefore very important to decide whether you can or want to fulfil the buying price.
- It is therefore wise to have the valuation done before signing the private purchase contract ánd paying a large deposit. It is always advisable to include in that private contract a clause that will let you have your deposit back in case you cannot complete because of the failure to obtain a needed mortgage. (to see an example of this clause go to "News" - "Difficult times for mortgages" or click here.)
- In case that the valuation is higher than the purchase price, most banks will offer the 60-70% of the purchase price and not the valuation. In some cases we find banks and properties that are willing to go up to 80% and even higher in specific cases. But never higher than the purchase price without the purchase costs.
- Always the costs of the valuation are for the purchasers own risk (see above - provision of funds). We will ask you to pay these costs, which are related to the valuation result, up front. E.g. the higher the value, the higher the valuation costs. On average will a value of 250.000€ come to a valuation costs of around 400€.
- The valuation is physically done by a person (usually an architect) hired for that purpose by the valuation company. This person will visit the property and make a report based on comparison to the valuation company. This company will than recalculate the values and offer the final valuation to the buyer and its bank.
- Each bank works with its own valuation company(ies). That means that first has to be decided with what bank someone wants to do the business.
- After the valuation is done the bank will check the property legally, as they do not supply any funds for anything illegal. And on that basis and the financial details of the applicant (click here for those details) they will issue an offer for the mortgage. This offer will become a firm offer from the moment the notary date is decided but never will be valid for much longer than for a few days.
- Before the signing date, Spanish Link will accompany the applicant to the bank in order to open all necessary accounts, arrange internet banking, apply for credit and debit cards, etc., etc.
- At and just before the signing at the notary of the mortgage deed and the purchase deed (Escritura´s), Spanish Link will arrange and check all the necessary proceedings. That is a lot of paper work, but needs to be done properly in order to safeguard the interest of the applicant.
- At the notary the bank will be present or represented as well as the banks lawyer. Also a insurance company might be present for the obligated insurances. Spanish Link will translate if needed. Translation is obligated by law when applicant does not understand sufficient Spanish in order to know what they are signing.
- After signing the mortgage deed the notary will continue to sign the purchase deed and the bank’s lawyer will after that take care both deeds are registered in the land and mortgage registers. The purchaser will get a so called Copia Simple of the deeds, which means official copies.
- A little while after the notary the client will together with Spanish Link finalize the account matters concerning the provision of funds.
The applicant/purchaser does not necessarily needs to be present at the signing or any other matter where normally he/she has to be present and/or sign papers. He/she can be represented by proxy through a Power of Attorney. In many cases in the past Spanish Links director, Santi, has fulfilled that role on behalf of her clients. Anyone else, to the liking of the clients can be asked to do so as well.