Spain Q&A

Frequently Asked Questions

Spain is consistently the most popular destination not only for tourist visitors from the UK, but also for the overseas property market. Despite the premature reports of the demise of the Spanish property market, there are still areas of growth.

High end property appears to remain strongly in demand, and while there are some indications that there are fewer budget properties being purchased on the Costa del Sol, there have recently been reports of something of a mini-boom in the “Costa Oriental”, or the eastern end of the Costa del Sol.

Inevitably, with this amount of property being acquired by British buyers in Spain, there are a huge amount of questions that are raised as a consequence of the buying process. Below is a selection of the most common queries:

Inspection trips

I have paid a deposit to reserve a property until we go on an inspection tour the end of November. The firm we are dealing with has asked us to sign a preliminary contract and send now. Is this correct? I was under the impression that our €1,000 would be enough.

I would always advise against handing over any kind of deposit or reservation fee without having any kind of paperwork to protect you. To be honest, at the moment, there is nothing besides an ethereal, verbal agreement in principle between yourselves and the developer. Although I am not suggesting that this would be the case, but until you have a contract in place, there is nothing to stop the company you are dealing with from disappearing with your cash, and there have been instances of this happening when people have dealt with unscrupulous companies in the past. If you are happy with the document, have had it checked by an independent legal expert to make sure it allows you to have the deposit returned should the development or plot not be what you have been led to believe. In the normal run of things, I would recommend that you should visit the development and plot before you commit to putting any money down, but in this instance, you may be best advised to make sure you get hold of some paperwork in order to protect yourselves and your initial deposit as far a possible.

Currency

Can you advise me the best way to move money from England to Spain to get the best exchange rate?

The one piece of advice I would give you is NOT to do this through your High Street bank. There are a host of specialist currency exchange companies that deal specifically with the transfer of funds for the purchase of overseas property. These should give you a far superior rate to the banks, potentially saving you thousands of pounds. The other advantage is that you are able to fix the exchange rate for a specified point in the future - this means that if there is a favourable exchange rate at the moment you can protect yourself against the possible currency fluctuations for up to 18 months. The downside is that in the same period of time, you do not benefit from any rises in the exchange rate.

Deposits

Is it normal when buying in Spain to pay the deposit direct to the vendor and not the solicitor?

This often depends on whether you are buying a resale or a new-build property, but you are always much safer to have the money lodged with a lawyer in this kind of situation. If the vendor isn't keen on this, you might want to ask why. Although it can be tempting to try to save costs where you can, you will leave yourself open to additional future costs and stress if you try to complete important parts of the process without the due legal attention.

Investment

I am considering buying a property abroad as an investment. I am looking at two areas - inland Spain, and the Turks and Caicos Islands. I am new to investing in property, and am unsure where to go for sound advice, since I have received somewhat conflicting advice since I started searching. Both developments are off-plan, and I am particularly interested in what research I should do or precautions I can take to minimise risk.

It can be difficult to find the right, independent advice to guide you through the maze of buying a property overseas. The main message really is not to rush into anything — you seem to have the right idea, making use of any sources of information you can. No matter what a developer or agent says about a development selling out, there will always be another opportunity, another property available. The important thing to remember is where the information you obtain comes from — it’s fine to gather information from 'less than impartial' sources, so long as you recognise that fact, and treat the information accordingly. Generally-speaking, the more information you gather on buying overseas, the easier you will find it to determine between the useful facts and the sales pitches. Another thing to try is to visit the countries you are interested in as much as possible, and at different times of the year. Visiting a country off-season can give you an insight into the 'real’ spirit of the place.

Future Prospects

Is this a good time to buy an apartment in Spain? I'm thinking of buying and keeping it for 10 years.

The media are particularly fond of heralding the demise of the Spanish property market, but despite this, the British public is still heading out to Iberia to buy property more than anywhere else in the world. While it is true that the days of rampant property speculation on the southern Costas, and the almost weekly price rises that went with it, are all but over, the property market in Spain is maturing nicely. This leads to more people buying property there because they want a home in the sun, rather than to make a quick profit, and this in turn leads to a more stable market. If you are looking at a medium- to long-term investment, Spain is still a good option.

Mortgages in Spain

Do I need a deposit to raise a mortgage in Spain?

You are lucky in a sense as the market in Spain is one of the more mature markets in overseas property, and there are therefore a range of mortgage products available. Typically, you are able to get finance for up to 80 per cent of the value of the property, and thus need to find a 20 per cent deposit. Some lenders will offer personal loans to top up the mortgage and make up at least part of the deposit amount. I have seen self-certification mortgages of 100 per cent offered for property in Spain, but these will incur higher interest rates.

Legal costs

We are thinking of buying a property in Spain and I have had two quotes for legal work which both are one per cent of the purchase price. Here in England we would only pay about 25% of that figure. Is this normal?

Legal fees when buying a property overseas vary from country to country, and depend on the amount of work the lawyers have to undertake. In Spain, the standard charge is between one and two per cent, so it looks as though you have probably found a well-priced representative. Just make sure that you know what you will be getting for that cost, and that there won't be any hidden extra charges in order to complete the sale. Also, and I'm sure I don't need to tell you this, never automatically use the legal representation proffered by your agent or developer — you need to have someone who is acting solely in your interests in this situation.

Co-buying

I am moving to Majorca in the near future. I have a daughter who already lives there. She has a job with a contract and has lived there for two years. She rents an apartment. She has been told she could get a mortgage for €100,000. We have a house we live in at present in UK worth £270,000 with a £70,000 mortgage. Would it be possible to release equity from this house to enable our daughter to buy a property in Majorca for €300,000?

Of course you would be able to release equity in your UK property in order to help add your funds to your daughter's and buy a place big enough for all of you to share. There are a couple of things you will need to work out, however. Assuming you are keeping your UK property to rent out or to keep for yourselves, you will have to make sure that you can cover the mortgage payments. The best way is to set up a regular payment system through your bank or a foreign exchange specialist, which hopefully should minimise your currency charges. The other thing to work out is how you combine the money and still keep a legal understanding of the ownership of the properties in question. To do this, you may have to release the equity in your present home and then draw up an agreement through a lawyer making sure the status of the money is accounted for, be it loan, gift, or as part owners of the new house. You may also have to satisfy the lender that the repayments will be met. Your best route is to consult a specialist IFA, who should be able to advise you of the best path to take on this. The good news is that financing property overseas in this way is becoming more and more popular, so there should be no huge hurdles to overcome.

Related Articles

• Buying a Property in Spain
• Guide to the Costa del Sol
• Guide to the Costa Blanca