Consider getting pre-approved for a mortgage to understand what you can afford
Consider getting pre-approved for a mortgage to understand what you can afford

How much money do I need to buy a house in Spain?

You can find a property that fulfills your needs by understanding the market, calculating your home-buying budget, and seeking professional advice. This checklist can help you navigate the process confidently and clearly, leading to a successful property purchase in Spain.

Erik Edin
Written by Erik Edin
Published at 2023-08-14T13:29:57Z
Last updated at 2024-01-03T12:44:59Z
Readtime 4 minutes

Buying a house in Spain has become an increasingly popular choice for many, but the costs can vary widely depending on where you want to live and what kind of house you want. Understanding your home-buying budget is essential to navigate these variations.

In this guide, we'll look at the things that can make the price go up or down, explain the different costs you'll need to think about, and give you some helpful tips to make a smart choice. 

Whether you're moving to Spain or buying a vacation home, this information will help you understand what to expect.

What is the average cost of a house in Spain?

As of July 2023, the average asking price for residential properties for sale reached €1,963 per m2, reflecting an increase of 6.45% compared to July 2022. 

After a remarkable surge in 2022, many expected rising interest rates to lead to a slowdown in 2023. Instead, the strong price growth has continued in the first half of 2023. Regional variations are significant, with the highest price in the Andorra region at €4,159 per m2, and the lowest in Castilla - La Mancha at €974.

The rental market also shows disparities, with the highest asking price in the Comunidad de Madrid region at €18.58 per month per square meter and the lowest in Castilla - La Mancha at just €6.53.

When planning to rent out a property in Spain as a foreigner, it's essential to comply with all legal requirements and obtain the necessary permits and registrations. If you decide that buying to let in Spain is the right choice for you, continue reading to learn everything you need to know.

What are the costs of buying a property in Spain?

For a property worth €350,000 in Madrid, the following costs would typically apply:

1. Property purchase price

The largest single expense is, of course, the purchase price of the property itself. As a non-resident, you can typically finance 70% of the property value. However, if you're buying a more expensive property or intend to make it your permanent home, it might be possible to arrange financing for as much as 80% of the value.

Bear in mind that it is common for the surveyor to report a lower assessed value than the transaction price. It is the lower of the assessed value, and the purchase price, which the banks use to calculate your maximum financing (also known as maximum loan-to-value).

2. Property Transfer Tax (ITP)

When buying a second-hand property in Madrid, the Property Transfer Tax (ITP) must be paid. This amounts to €23,625 on a property worth €350,000 in Madrid.

3. Legal fees

As a non-resident buyer, you should consider hiring a lawyer to review contracts and ensure legal compliance. This typically ranges from 1% to 2% of the purchase price. For a €350,000 property, you may expect to pay around €3,500 to €7,000.

4. Notary fees

The notary fees for notarizing the property deed are around €450.

5. Registration fees

Registering the property with the local property registry is a crucial step; in this case, it will cost €1,050.

6. Real estate agency fees

The agency fees for handling the property transaction amount to €350.

7. Property appraisal

An appraisal of the property to determine its market value is often required, especially if you are considering financing. This would typically cost €400 for a property of this value.

8. Additional costs

Additional costs may include home insurance, utility connections, and potential renovations or customization. These costs can vary widely based on individual preferences and requirements.

The total costs for purchasing a second-hand property worth €350,000 in Madrid, including taxes and various fees, would be approximately €379,375 to €383,375 (considering legal fees of 1% to 2% of the property value). Read more about the key taxes and costs you must consider as a non-resident when buying property in Spain. 

How much mortgage can I get in Spain to buy a house as a foreigner?

Foreigners can expect to receive mortgages covering 60-70% of the property's purchase price or appraised value. 

Below, we explore the key aspects related to obtaining a mortgage in Spain as a non-resident:

1. Interest rates and terms

Interest rates for non-resident mortgages might be slightly higher compared to those for residents. The terms usually range from 10 to 25 years, and the rates can be either fixed, mixed, or variable.

Variable rate mortgages are priced based on the Euribor plus a spread. In July 2023, the spread ranged from 0.3% to 1.5%, depending on the bank and the size of the mortgage. Larger mortgages, with lower LTV, usually attract lower interest rates.

2. Income and financial stability

Banks will thoroughly assess your income and financial stability. Proof of regular income, employment status, existing debts, and credit history will be vital. Your ability to secure a mortgage and the amount you can borrow will be heavily influenced by your financial health.

If you already own a property, the banks will factor in the property value, as well as any outstanding mortgage, when assessing your case. Your existing mortgage repayments will be deducted from your income when banks assess how much they can lend to you.

3. Required documentation

As a foreigner, you'll need to provide additional documents, such as your passport, proof of residence in your home country, Spanish NIE number (Foreigner Identification Number), bank statements, payslips, and employment contract. Depending on the lender, you might also need to provide a translated and legalized proof of income. 

Most lenders are happy to accept documents in English, and some will accept them in German, French, and Swedish too. Fortunately, Homevest can help you manage translation requirements as cheaply as possible.

4. Property appraisal

Banks will require a formal appraisal of the property you wish to buy to ensure it's worth the amount you're borrowing. This appraisal must be conducted by an agency approved by the Bank of Spain, and you'll typically be responsible for the cost.

5. Other considerations for foreigners

If your income is in a currency other than the Euro, banks might evaluate the risk associated with currency fluctuation. If you earn your salary in GBP, USD, NOK, DKK, or SEK, there are typically few complications. 

In other currencies, you may have fewer options at your disposal, but almost everyone can get a mortgage in Spain with a few extra hurdles. 

It might be wise to hire a local lawyer familiar with Spanish property laws, such as Hoteland, to assist in the mortgage process. 

How to calculate your home-buying budget?

Buying a property is a significant financial commitment, and determining a realistic budget is the first critical step. 

Here's a step-by-step guide to help you calculate your home-buying budget if you plan to buy with a mortgage.

1. Assess your monthly income

Start by evaluating your monthly income, including salaries, bonuses, investments, or any other steady revenue streams. If you're buying the property with a partner, include their income as well.

2. Calculate your economic effort ratio

Spanish banks will calculate what’s called your “economic effort ratio”. The economic effort ratio is calculated as your monthly mortgage repayments divided by your monthly free cash flow. 

Your free cash flow is your net income minus any existing debt payments.

Your economic effort ratio cannot exceed 40%, but some banks might require it to be lower. Especially if you earn your salary in another currency than Euros.

3. Determine your down payment

The down payment is a percentage of the property's price you'll pay upfront. In Spain, this might range from 30% to 40% for foreigners, but can also be lower. Consider your savings and what you can comfortably put down without draining your financial reserves.

4. Estimate other buying costs

Include other buying costs such as Property Transfer Tax, notary fees, registration, agency fees, and appraisal costs. These may amount to an additional 10% to 15% of the property's price. You can’t use a mortgage to finance these.

5. Calculate your mortgage capability

If you plan on financing the purchase, consult with mortgage providers to understand how much you might qualify for. Consider the interest rates, the loan term, and ensure the monthly payment aligns with what you can afford.

6. Consider long-term financial goals

Think about your long-term financial plans and how this property purchase fits into those. Ensure that buying a home won't hinder your ability to achieve other financial goals, such as retirement planning or children's education.

7. Use home-buying budget calculators

Many online calculators are specifically designed to help you calculate your home-buying budget by considering all the above factors. Utilizing these tools can give you a quick estimate. Fill out Homevest’s online application to get a sense of your budget.

8. Consult with financial professionals

If you need personalized advice, consulting with a financial advisor or mortgage broker who understands the Spanish property market can be invaluable.

Getting a mortgage can be challenging, but with careful planning and research, you can secure the financing you need to turn your dream of owning a home in Spain into a reality. Read on to discover how to secure a mortgage in Spain as a non-resident and make an informed decision.

Is there a way I can save money when I want to buy a house in Spain?

Buying a property is undoubtedly a significant investment, and the costs can quickly add up. 

However, there are several strategies and tips that potential homebuyers can employ to save money when purchasing a house in Spain:

1. Research different regions

Property prices can vary widely across different regions in Spain. Look for areas that offer value for your investment. You should also consider the timing, prices may fluctuate throughout the year. Monitor market trends and be ready to act when favorable conditions arise.

2. Hire a good real estate agent

Find a seller’s agent who knows the local market and can guide you to properties that fit your budget and needs. By working with a seller’s agent (also known as a personal shopper), you can explore the wider market. Make sure to compare prices beforehand, as they will often charge you a commission. A skilled agent can negotiate a lower price or better terms for you, which might be cheaper than going at it on your own.

3. Consider a fixer-upper

Properties that need some work might be priced lower. If you're willing to invest time and effort, you can save on the initial purchase price. UCI’s Suma Mortgage is a great financing option if you are planning a renovation. There are also tax benefits, as you can finance the renovation with a mortgage, which reduces your property transfer tax.

4. Shop around for a mortgage

Different banks might offer various interest rates and terms. Shop around and negotiate to find the best mortgage deal that suits your financial situation. 

Homevest is a digital service through which you can get competing offers with a single application. Unlike other brokers, the service is free of charge to you, as Homevest only gets paid by the banks.

You can consolidate and upload all the documents required for a Spanish mortgage application directly to your Homevest account.

5. Resale value

Consider the potential resale value of the property, including location and future development prospects.

Saving money when buying a house in Spain requires a mix of careful planning, understanding the market, negotiation, and making informed choices about the property, mortgage, and additional services.

Collaboration with knowledgeable local experts, awareness of available incentives, and a willingness to explore different options can lead to substantial savings.

Key takeaways: your budget checklist

Ensuring you have a clear understanding of your budget and the costs involved will enable you to make informed decisions. 

Here's a concise checklist of the key points to keep in mind:

1. Understanding the market and staying updated on the latest market trends, such as average asking prices.

2. Calculate your budget and consider getting pre-approved for a mortgage to understand what you can afford.

3. Explore different mortgage options and be aware of unique requirements for non-residents.

4. Consider cost-saving strategies:

  • fixer-uppers for potential savings.
  • Shop around for the best mortgage rates.
  • Utilize any available government incentives or grants.
  • Negotiate with the help of skilled real estate agents.

6. Think about future resale value and consider how the property aligns with your long-term financial and lifestyle goals.

7. Consult with financial professionals or mortgage brokers, especially if you are unfamiliar with the Spanish property market.

The journey to buying a property in Spain is filled with opportunities and challenges. 

By understanding the market, carefully calculating your home-buying budget, employing cost-saving strategies, and seeking professional advice, you can find a property that meets your needs without exceeding your financial limits. Keeping this checklist handy can help you navigate the process with confidence and clarity, leading to a successful property purchase in Spain.

Sources used:

  1. Real estate market July 2023
  2. Buying property in Spain as an expat
  3. Sales cost calculator
  4. Taxes and fees when buying a property in Spain

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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