Can a foreigner buy a house in Madrid? Here’s what you need to know
Foreigners can buy property in Madrid by following specific legal processes consistent with other Spanish cities. Continue reading a guide to understand the steps, what you need, and tips to help you decide.
With its cultural richness and modern appeal, Madrid attracts many through its world-class museums and cutting-edge fashion.
However, for foreigners, the magnetism of Madrid extends beyond its vibrant streets to the prospect of owning a home there—a process that can be both appealing and complex.
Navigating the local property market, with its specific rules, can be challenging, but with the right guidance, it's an achievable dream. This guide is designed to help you understand what you need to know about buying a house in Madrid, whether for investment or a new beginning in this city.
Is Madrid a good place to live?
It depends on what you like and need. Some people might love the city's history, fun nightlife, and many job chances. But living in Madrid and not knowing Spanish might be hard for some. Visiting Madrid first could help you decide if it's the right place for you.
Cost of living in Madrid compared to the UK
The cost of living in Madrid is generally lower than in many cities in the UK, especially in housing, dining, and transportation.
To help you get a better picture, let's take a look at some examples together:
- restaurant prices in Madrid are 44.3% lower than in London
- groceries prices in Madrid are 24.1% lower than in London
- the price per m2 for an apartment in Madrid can be up to 73% cheaper than in London, depending on its location inside or outside a city center
- a monthly pass transportation in Madrid is 79% cheaper than in London
Looking to buy property in Spain from the UK? Continue reading to learn about the process, requirements, and valuable tips for making an informed decision.
Cost of living in Madrid compared to the US
Similar to the situation in the UK, the cost of living in Madrid tends to be more affordable than in the US, especially regarding housing.
The cost per m2 for an apartment in Madrid is significantly lower than in major US cities: 71% less than in New York, 60% less than in San Francisco, and 51% less than in Los Angeles.
Beyond housing, Madrid also offers generally lower expenses in other essential areas. Costs for necessities such as utilities, transportation, food, and healthcare, are typically more economical in Madrid compared to the US.
Considering a move to Madrid, buying a holiday home in Barcelona, or planning a retirement in Mallorca? Continue reading to discover all the essential information for purchasing a house in Spain as an American.
Is it a good idea to buy a house in Madrid?
Buying a house in Madrid could be a good idea if it fits your budget and lifestyle. Still, it's essential to consider the high costs and talk to a local expert to understand the market.
What is the average cost of a house in Madrid?
The average price per m2 in Madrid hit a two-year peak in July 2023, reaching a value of 3,938 EUR.
In the same month, the real estate market in Madrid saw the highest asking prices in the Salamanca district, where properties were listed at an average of 6,009 EUR/m2.
On the other hand, the Villaverde area recorded the lowest average price, with properties going for 1,934 EUR/m2.
What are the costs of buying a property in Madrid?
It's important to keep in mind from the beginning that the taxes are closely related to the district and the type of property you choose. The taxes are different if the property is new or second-hand.
Let's assume you have found a 90 m2 second-hand apartment in Salamanca, valued at 449,000 EUR.
An estimate of the taxes that you must pay in addition to the sale price includes:
- Property Transfer Tax (ITP): 30,307 EUR
- Notary: 450 EUR
- Property registration: 1,347 EUR
- Agency: 350 EUR
- Property appraisal: 400 EUR
To understand the fees for a new apartment, let's suppose you have found a property of 61 m2 in the Villaverde district worth 109,000 EUR.
In this case, you will have to pay an additional 32,854 EUR:
- Value Added Tax (IVA): 10,900 EUR
- Stamp Duty (AJD): 817 EUR
- Notary: 450 EUR
- Property registration: 327 EUR
- Agency: 350 EUR
- Property appraisal: 400 EUR
If you plan to buy to let the apartment, there are other fees that you must consider—for instance, a 19% rental income tax for EU citizens.
Is it easy for foreigners to buy property in Madrid?
Foreigners can buy property in Madrid by following specific legal processes consistent with other Spanish cities.
Acquiring property doesn't grant residency rights, except if you invest at least 500,000 EUR, which may qualify you for residency under certain conditions.
If you’re a non-EU citizen, read on for more information and see what you need to do to qualify for residency in Spain by buying property.
What is the process for buying a house in Madrid?
- Set your budget
- Apply for the NIE number
- Find the property and negotiate an offer
- Complete due diligence
- Sign and pay your deposit
- Close and register the sale
Remember that a mortgage can significantly enhance your property budget, allowing you to invest in the home of your dreams. The good news is that Homevest can assist you, simplifying the process of obtaining a mortgage in Spain directly from abroad.
Homevest collaborates with all the leading banks in Spain, including UCI, Santander, and Sabadell, ensuring you can access the best options tailored to your needs.
Is it hard to get a mortgage in Spain as a foreigner?
Non-residents can secure a mortgage in Spain but may face a more complex and potentially more expensive process than residents.
The challenges include a lower loan-to-value ratio, the need for extensive documentation, higher interest rates, and legal and tax requirements.
What Spanish mortgage can you access for buying a property in Madrid?
Sabadell, Cajasur, Unicaja, Bankinter, BBVA, Santander, Caixa, and UCI are some Spanish banks that provide mortgages to foreigners looking to secure a property in Madrid.
| Lender | Suitable for | Pro | Con |
|---|---|---|---|
| Sabadell | Foreigners seeking various mortgage options with competitive rates and favorable terms | The application process is easy and user-friendly; documents in English, French, and German are accepted without the need for translation | A minimum property purchase requirement of 150,000 EUR |
| Cajasur | Foreigners interested in buying property in Costa del Sol and Andalusia | A flexible loan amount range from 80,000 to 1,000,000 EUR | An opening fee of up to 1.5%, which may increase the cost of securing a mortgage |
| Unicaja | Foreigners interested in a mortgage with an online application process | The process of applying for a Unicaja mortgage is 100% online, except for going to the notary office | Fixed-rate options might not offer the most competitive rates in the market |
| Bankinter | Foreigners from the US and UAE | Full remote banking services are available, providing convenience when you are not in Spain | The fixed-rate mortgage is only available to borrowers whose income or assets for loan repayment are in euros |
| BBVA | Foreigners who earn income in Euros | A range of mortgage options from 100,000 to 2,000,000 EUR, offering flexibility to borrowers with varying financing needs | A limited number of foreigners can access a loan at BBVA |
| Santander | Foreigners from EU, UK, US | A flexible loan amount range of 100,000 to 1,000,000 EUR | Santander prefers and prioritizes customers who have already found the property they wish to purchase |
| Caixa | Foreigners from various nationalities and residency countries | CaixaBank offers mortgages ranging from 100,000 to 2,900,000 EUR | The current 35% fixed debt ratio may limit eligibility for borrowers, especially those with lower incomes |
| UCI | Foreigners interested in purchasing a second-hand property for renovation | UCI offers a grace period of up to 12 months for a renovation mortgage, during which you only pay interest until completion | Financing for renovation may be restricted to certain types of properties or renovations, potentially limiting a buyer's ability to make desired changes |
What's the best way to compare Spanish mortgages?
Mortgages in Spain are exclusively granted in euros. Therefore, you must be aware of potential currency fluctuations that could affect your repayment amount.
The maximum loan-to-value (LTV) ratio for non-residents is typically set at 70%. This means you may need to make a more substantial down payment than resident buyers.
Remember that Spanish banks evaluate each mortgage application on a case-by-case basis. Consequently, the interest rates offered may differ significantly between individual cases.
Explore the best Spanish mortgages for non-residents and find out how to compare them quickly and without fees.
Is there a way to simplify accessing a Spanish mortgage from abroad?
If you’re looking for a solution to save time and money, Homevest might be one option worth considering.
Homevest offers a digital platform that simplifies the mortgage application process for non-residents interested in buying a property in Spain. It’s a service free of charge that can help you save more than with other mortgage brokers.
You can easily upload and consolidate all the documents for a Spanish mortgage application in your account. Homevest provides advice tailored to your needs and can help you compare offers from multiple banks.
Discover Sandra's journey of buying a property from France to Spain and learn how Homevest provided her with options and support, leading to a successful outcome.
Tips to consider when you’re buying a house in Spain for the first time
1. Conduct thorough research. Idealista.com, Fotocasa.es, and ThinkSPAIN are some property websites that can assist you in finding a property in Madrid.
2. Analyze all the available options for your financial situation. Homevest can assist you in comparing the mortgage available in Spain and accelerate the application process directly from abroad.
3. Avoid losing money on exchange rates. Since mortgages in Spain are granted only in euros, use a financial service like Wise to save on the exchange rate.
3. Understand the legal requirements. Apply for the NIE number in advance at the Spanish Consulate in your country or authorize a representative to apply on your behalf.
4. Align your decision with your financial situation. This includes considering the location, property type, and how it fits into your financial plan.
5. Get home insurance to protect your investment against unforeseen events.
Sources used and checked in August 2023:
- Cost of living comparison Madrid vs London
- Cost of living comparison Madrid vs New York
- Cost of living comparison Madrid vs San Francisco
- Cost of living comparison Madrid vs Los Angeles
- House pricing in Madrid
- Sale cost calculator
We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.
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