Buying property in Spain with cash: requirements and alternatives

Buying property in Spain is a great choice for many reasons. The weather is warm, the quality of life is good and things are relaxed.

If you have the money, it's important to know what buying a property in Spain involves. Could there be a better way to use your cash and get more from your investment?

Let's find out.

How to buy a property in Spain with cash? A step-by-step guide

Before anything, make sure your funds are accessible so you can easily pay the deposit and complete the transaction. If your lawyer knows your preferred completion date and has all your documentation ready, the process can be accelerated as much as possible.

How can you streamline the process?

1. Calculate your budget

Add additional costs to your property budget to ensure it covers legal fees, taxes, registration, and notary fees. Focus your search on properties within your budget.

Remember that obtaining a mortgage could extend your property budget, allowing you to preserve your liquidity. This makes it easier to allocate funds to other investments.

For a quick simulation of how much you can borrow based on your financial profile, check out Homevest. 

This digital service provides an accurate budget estimation to show how much you may qualify for from Spanish banks, along with a helpful price range to guide your property search.

2. Research locations

Choose a location that best suits your lifestyle and needs.

If you're drawn to the bustling capital of Spain, which teems with business opportunities, buying property in Madrid could be an option. 

On the other side, Mallorca is the least affected by economic cycles, making it a potentially safe haven for your investment.

3. Find a real estate agent and view properties

While you can conduct property searches yourself, having someone who knows the market will make things easier for you. 

A real estate agent typically charges a fee of 3-5% of the property's price.

4. Negotiate a fair price with the seller

5. Obtain the NIE

The NIE is the Spanish Identification Number required for property transactions. You'll also need it to secure a mortgage for financing.

6. Open a Spanish bank account

With the NIE in hand, you can open a Spanish bank account for transaction purposes.

While not mandatory, having a local account can make money transfers more efficient and potentially save on conversion rates if your funds are in a currency other than the euro.

7. Sign the purchase agreement or Contrato de Compraventa

This means you agree to the terms and commit to the purchase once you sign the contract.

8. Pay the deposit to secure the property

This initial agreement involves placing a 10% deposit on the property and setting a date for the final sale, typically within three months. It's a binding contract for both parties, so only commit to it if you want to purchase the property.

9. Complete the due diligence to make sure the property is free of debts

10. Finalize the purchase

Complete the payment and sign the sale contract in front of a notary.

11. Register the property

After receiving the keys, make sure the property is registered in your name at the local land registry.

12. Pay the taxes

You must pay Stamp Duty within 30 days of the purchase, which ranges from 0.5% to 1.5% of the property price. If you bought a resale property, you must also pay the Property Transfer Tax, which varies from 6% to 10% of the property value.

What are the requirements for buying a property in Spain with cash?

When considering a cash purchase for a property in Spain, note that Law 7/2012, dated October 29, restricts cash payments for transactions within the country.

For non-tax residents, the cash payment limit is set at €10,000. 

Therefore, if your funds are from outside Spain, you'll need to complete the payment through an international bank transfer. Such transfers can be expensive due to the currency exchange fees charged by banks.

How long does it take to buy a property in Spain?

Completing your purchase typically takes two to three months from the moment you obtain your NIE.

Opting for a mortgage could extend this timeline by a few more weeks.

An alternative for buying a property with cash: a mortgage

Considering a mortgage as an alternative to paying cash for a property can be a wise decision. It frees up your capital for other investments and offers potential tax benefits from interest deductions.

However, high interest rates can make securing a mortgage more challenging and expensive. In such cases, getting help from Homevest can be invaluable in securing favorable terms.

Homevest allows you to request and compare offers from top Spanish banks, connecting you with experienced mortgage brokers tailored to your needs. Your broker will assist with preparing and submitting your application and represent your interests in negotiating terms, ensuring you find the right mortgage for your profile.

Non-residents can get mortgages covering up to 70% of the property's sale price, requiring at least a 30% down payment plus taxes and fees.

Continue reading to understand everything you need to know about getting a mortgage in Spain as a non-resident in 2024, including requirements, mortgage rates, and tips.

Can you maximize your investment potential with a mortgage?

Mortgages not only allow you to retain liquidity for other ventures but also contribute to increased long-term wealth by diversifying your investment portfolio and minimizing risk.

Additionally, mortgages offer the possibility of tax deductions on interest payments. Adopting this strategy, particularly with favorable mortgage terms, can enhance one's financial growth over time.

"Using a mortgage to buy a property can significantly boost the return on your initial outlay, which is the down payment. For example, purchasing a 200,000 EUR property with a 150,000 EUR mortgage and a 50,000 EUR down payment means that a 10% rise in the property's value, equivalent to 20,000 EUR, effectively results in a 40% gain on your initial 50,000 EUR investment",

explains Iván Bellod, Lawyer and Managing Director at Hoteland.

Sources used and checked in March 2024:

1. Limitations on cash payments

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.