About Buying Fees & Mortgages in Mallorca
When buying your dream property in Spain you should take into account the various fees and taxes. As a general rule of thumb, you can expect to pay an additional 10% of the purchase price.
Property buying fees
Here are some examples of the costs to look for:
- solicitor (or 'notaire') fees and commission
- estate agent fees
- property tax
- plusvalia tax
- foreign currency exchange costs (if applicable)
- VAT & stamp duty
- mortrgage fees
Solicitor or 'notaire' fees
Notary fees and a property registration fee will also be due. The amounts will vary according to the purchase price of the property.
Estate agent fees
This is a question you should ask the estate agent at the beginning of your purchasing process. They will earn commission from the sale and so will naturally try to get the best possible price for the property.
These costs include a property tax which is around 7% of the price paid for the property. This property tax is also known as the transfer tax, or ‘Impuesto de Transferencia de Propiedad’.
Plusvalia Tax (Capital Gains Tax)
The plusvalia tax is normally paid by the seller but sometimes this tax is passed on to the buyer. It is similar to capital gains tax and is related to how much the land on which the property sits has appreciated during the time of the previous ownership.
Foreign currency – foreign exchange rate fluctuations
If you are planning to purchase your overseas property with equity released from the remortgage of a UK property or other cash funds, then you may need to convert your money into euros. This can be expensive and risky as you leave yourself open to currency exchange rate fluctuations. There are steps you can take to minimise these risks, such as using a company to effectively ‘lock’ your exchange rate months in advance. Today, there are a lot of companies that provide currency exchange risk solutions.
VAT & Stamp Duty
There is no additional stamp duty or VAT to pay for existing properties.
If you are buying a new build, you will be liable for VAT on the price of the property. Stamp duty is also payable – this can range from 0.3% to 2.0% depending on the property. You are responsible for paying this tax by filling in a form available from your local government financial institution. Ask for a bank guarantee when making stage payments – the developer is legally obliged to secure deposits in a special, separate account which can only be used for building purposes. An off-plan property should have a certificate (certificado de final de obras) proving the finished build has been signed off by a registered architect. For more information on this, take a look at the British Consulate advice pages.
Spanish banks can lend between 60 & 70% to non-residents and often more to residents. This amount will be based on their valuation of the property, The cost of this valuation will be included in charges for the mortgage application; the application costs will vary according to the purchase price of the property.
To apply for a mortgage you must ensure that:
- You have sufficient income to cover your mortgage
- You have life insurance cover
You should always consult a professional when considering your Mallorca mortgage options so that you understand the various implications. There are several options:
- Spanish banks and mortgage providers - they have their own lending criteria including how much they will lend, the term of the mortgage, what products they offer and charges for their arrangement fees.
- A mortgage broker - they can provide advice about borrowing and the mortgage products which will best suit the circumstances. A mortgage broker may have a better local knowledge of which lenders to approach and an idea of quotes for lenders. They can act as a liaison between yourself and the lender, which is particularly useful if you are not fluent in Spanish. As a general rule mortgage brokers registered in Spain will receive commission directly from the lender and so do not charge a fee.
- The Inmobilario (estate agent) may offer a mortgage service and usually will offer a service similar to that of a mortgage broker
You will be asked for proof of income in the form of pay slips for employed applicants or one or two years accounts for self-employed. Tax declarations from the buyer's country of tax residence are also required.