Can an American buy property in Spain? A complete guide for US buyers

Purchasing a property in Spain can be a dream for many Americans. 

Whether you're looking for a vacation home, a retirement retreat, or an investment opportunity, Spain offers a rich cultural heritage and a pleasant climate. However, buying property in a foreign country has its complexities.  

Here's what you need to know before taking the plunge.

Is it cheap for an American to live in Spain?

Spain uses the Euro, and one dollar was worth 0.91 Euros on 7 August 2023. 

Spain is the fourth largest country in the EU, with a population of 47 million. According to a report by the General Council of Notaries in Spain, there are 41,953 American expats living in Spain, and the number of properties sold to Americans jumped 88% from 2019 to 2022.

Cost of living in Madrid vs New York

The cost of living in Madrid is generally more affordable than in New York, across various aspects of life. 

In terms of housing, a 20-year mortgage for a two-bedroom apartment in Madrid costs around $1,290 per month at an interest rate of 4.65%, while the same in New York is approximately $7749 with an interest rate of 7.40%. 

Other expenses such as utilities, transportation, food, healthcare, education, and entertainment are also typically lower in Madrid.

However, both cities offer unique lifestyles, opportunities, and experiences, and individual preferences and needs will greatly influence the overall cost of living. While New York is known for its vibrant culture and amenities, it has a higher price tag. On the other hand, Madrid offers a rich cultural heritage and more affordable living options. 

What are the legal requirements for buying a property in Spain?

Buying property in Spain requires compliance with specific legal and financial regulations. American buyers must obtain an NIE number, a Foreigner Identification Number required for any financial transaction in Spain. 

Mortgages may be available from Spanish banks, typically at an interest rate of around 4.65% for a two-bedroom apartment in a city like Madrid.

 Understanding local taxes, including property and transfer taxes, is essential, and hiring a Spanish legal representative is highly recommended to navigate the legal process.

What’s the property market like in Spain?

The Spanish property market has experienced fluctuations in property values and demand. Economic factors, such as currency exchange rates and the overall health of the Spanish economy, impact investment decisions.

American buyers in Spain

While Americans buy all over Spain, most American buyers are overrepresented among foreign buyers in Madrid, Basque Country, and Navarre. In Navarre, Americans accounted for 45% of properties bought by non-residents.

Property types and locations

Spain offers various property types and locations that appeal to American buyers. Coastal areas are popular for vacation homes, while cities like Madrid and Barcelona offer urban living and investment opportunities. 

Property prices in Spain are generally more affordable than in many U.S. cities, making it an attractive option for a diverse range of buyers. Spain’s property prices grew 6.0% year-over-year in March 2023.

Spain's property market exhibits diverse trends across its regions, and it’s important to look beyond the overall Spanish market. Madrid, Barcelona, Costa del Sol, and the Canary Islands are markets of particular interest to American buyers. 

Challenges and constraints

Challenges and constraints differ across these regions. Madrid faces limited land availability and high construction costs, regulatory interventions impact Barcelona, Costa del Sol struggles with planning permission, and the Canary Islands deal with varied price trends across different islands.

Spain's property market demonstrates resilience and growth across these key regions, each offering unique opportunities and facing distinct challenges. The emphasis on sustainability, international influence, tourism-driven demand, and regulatory impacts shapes the market dynamics, painting a complex but positive picture of Spain's real estate landscape.

Market trends and opportunities 

In Madrid, the market is characterized by strong demand for new and sustainable developments, with a 5% increase in property prices. 

Barcelona sees a revival focusing on renovations and eco-friendly properties. Still, the growth is modest at 2%, affected by regulatory changes like rental price caps. Costa del Sol enjoys steady growth driven by tourism and foreign buyers, with a 12% increase in new builds and a 5.3% rise in property prices.

The Canary Islands stand out with a dramatic 45% increase in property sales and a moderate 3.8% rise in prices, with international buyers playing a significant role. 

Comparatively, international tourism and foreign buyers have influenced the Canary Islands and Costa del Sol more. At the same time, Madrid and Barcelona focus more on sustainability and urban development.

In all these markets, mortgages are available to American buyers. They are an essential part of maximizing your property budget and minimizing taxes.

How easy is it for an American to buy property in Spain?

Buying property in Spain as an American is relatively straightforward. However, it does come with some legal and administrative procedures that must be followed. 

Here's a general outline of the process:

1. Obtain a Foreigner's Identification Number (NIE). This number is required for any property transaction and can be obtained through a Spanish consulate or in Spain at a police station.
2. Hire a local legal representative. It's usually recommended to hire a local lawyer who is familiar with Spanish property law to ensure that the process goes smoothly. They can help with contracts, negotiations, and understanding local regulations.
3. Choose the property and agree to the terms. Once you've found the property you want to purchase, you must negotiate and agree on the price and terms with the seller.
4. Sign a preliminary contract. This contract outlines the terms of the sale and usually includes a deposit of around 10% of the purchase price.
5. Apply for a mortgage. If you require financing, you'll need to apply for a mortgage with a Spanish bank. As a non-resident, you typically have to provide at least a 30% down payment. If you apply on your own, banks might apply higher interest rates or add on opening fees. By using Homevest, you can make sure to get a fair deal, and the service is free of charge.
6. Complete due diligence. Your lawyer will usually conduct due diligence to ensure there are no legal issues with the property, such as outstanding debts or ownership disputes.
7. Sign the deed of sale (Escritura de Compraventa). This is done in the presence of a Spanish Notary Public, and the remaining balance of the purchase price is paid at this time.
8. Register the property. After the sale, the property must be registered in the Spanish property registry. There will be taxes and fees associated with this step.
9. Obtain residency if desired. While buying property doesn't automatically grant residency, it can be a pathway to obtaining a Spanish residency visa, if you buy a property worth over €500,000 (commonly referred to as a Golden Visa).
10. Consider tax obligations. You'll need to be aware of both Spanish and U.S. tax implications, including potential capital gains taxes and annual property taxes. A mortgage can help you reduce your tax bill in Spain.

While the process is not overly complicated, the legal and administrative requirements emphasize the importance of having a knowledgeable local representative to guide you through the process. 

It's also beneficial to be aware of the current exchange rates, as fluctuations can affect the overall cost of the property in U.S. dollars.

How easy is it to get a mortgage in Spain as an American citizen?

Obtaining a mortgage in Spain as an American citizen is possible. Still, it can be more complex than the process for Spanish residents. 

Here's an overview of what to expect and some of the challenges you might face:

1. Loan-to-Value ratio. As a non-resident, you may find that Spanish banks are willing to lend a smaller percentage of the property's value. While residents can borrow up to 80% of the property value, non-residents might only be eligible for 60-70%.
2. Interest rates. Interest rates for non-residents may be higher. Shopping around and negotiating with different banks can help you find the best rate. Using a mortgage broker can lead to better deals, as they access multiple lenders and a wider range of loan products than a single bank
3. Documentation. You'll likely need to provide more extensive documentation than a Spanish resident. This can include proof of income, tax returns, bank statements, employment verification, and possibly even more detailed financial information. Keep reading to find out what documents are required.
4. NIE Number. As mentioned, you'll need a Foreigner's Identification Number to apply for a mortgage, so this should be one of the first steps in your process.
5. Property appraisal. The bank will require an appraisal of the property by a bank-approved appraiser to determine the amount they are willing to lend.
6. Legal assistance. It can be beneficial to hire a local lawyer or mortgage broker familiar with the process for non-residents to assist you, especially if there are language barriers.
7. Time frame. The process might take longer for non-residents, so factor in extra time, especially if you're trying to coordinate the purchase from abroad.
8. Currency considerations. With income in U.S. dollars, not all Spanish banks will accept your application. You should also consider how currency fluctuations might affect your mortgage payments in euros.
9. Residency and tax implications. Consider how your mortgage and property ownership might affect your tax situation both in Spain and the U.S., and consult with a tax professional to understand the implications. For instance, Americans who receive rental income from foreign real estate have to report it on Form 1040 along with all of their global income.

Homevest provides an easy, quick, and cost-free solution to receive mortgage offers from leading Spanish banks for international property purchases. By filling out a single application, you can submit your request to all the banks in the network, allowing them to compete to offer you the best deal.

How to get the NIE number for a Spanish mortgage

A Foreigner's Identification Number (Número de Identificación de Extranjero, or NIE) is a required legal identification number for foreigners in Spain. It's essential for various activities, including purchasing property or obtaining a mortgage. 

Here's a step-by-step guide on how to get an NIE number:

#1. Determine the appropriate office. NIE numbers are typically obtained from the local National Police station (Comisaría de Policía) that deals with foreign documentation. In some regions, you may also apply at the Foreigner's Office (Oficina de Extranjeros).

#2. Complete the application form known as EX-15. This form is available online or at the appropriate office. You'll need to fill it out in Spanish.

#3. Gather supporting documentation. Required documents usually include:

• A copy of your valid passport and the original for verification.
• Proof of your reason for applying for the NIE (e.g. a mortgage application or property purchase agreement).
• Two passport-size photos (if required).
• Make an appointment: In many locations, you'll need to make an appointment (cita previa) to apply for the NIE. This can often be done online through the relevant government website.

#4. Pay the fee. There will be a processing fee for the NIE application. You'll typically need to pay this fee at a bank using a form provided by the police or Foreigner's Office. The receipt of payment must be presented at your appointment.

#5. Attend your appointment with all your completed documents, the application form, and the receipt for the fee. It's advisable to have a basic understanding of Spanish or to bring someone who can translate, as English may not be spoken at the office.

#6. Collect your NIE. In some cases, you might receive your NIE number on the spot. In others, you may need to return to collect it or wait for it to be sent to you.

#7. Consider hiring a representative. If you're not in Spain, you can authorize a representative (like a lawyer or gestor) to apply on your behalf. A notarized power of attorney may be required.

Note that procedures can vary by region and over time, so it's wise to check the specific requirements in the area where you are applying. 

If the process seems daunting, many expats choose to hire a local lawyer or gestor to handle the process, which can simplify things considerably.

What are the best Spanish mortgages for an American?

When buying a property in Spain, getting a mortgage is a good way to make your budget go further. 

When paying property tax in Spain, your mortgage amount will reduce the property's value. Note that this only applies if a mortgage is in place when purchasing the property.

Several Spanish banks offer mortgages to U.S. residents and dollar earners. Which bank is right for you will depend on the area where you are buying, the value of the property, the size of the mortgage, and your financial situation. A simple rule of thumb is the best deals are available to high earners with little debt.

How do I choose the best bank for a mortgage?

If you are buying a larger property, CaixaBank often has the best rates in the market. If you are looking to do a big renovation project, UCI offers a mortgage that lets you include the renovation cost in the property budget in a very tax-efficient way. If you are buying a property for under €100,000, Santander is one of the best choices. 

Sabadell is a good all-round bank. When applying for a mortgage, you need to get several offers. Otherwise, banks are unlikely to give you their best offer. 

Read how to secure a Spanish mortgage and discover the process and requirements to make an informed decision. 

What are the mortgage interest rates in Spain in 2023?

The data was collected on 1 August 2023

How much tax do you pay when buying a property in Spain?

Assuming you are buying a second-hand property worth 350,000 EUR in Madrid. In addition to the sale price, you will have to pay another 25,875 EUR for the following taxes:

Simulation rates on May 24, 2023. Prices may vary depending on the value of the property.

Purchasing a home in Spain involves more than just the listed price. Hidden costs, including various fees and taxes, can accumulate rapidly, potentially catching you off guard. Continue reading to understand what you need to know about property tax in Spain.

Buying property in Spain as an American might have some challenges, but with good advice, knowing the local rules, and careful planning, it's possible to own a house in this country. Remember that support like Homevest can accelerate the process of buying a house in Spain directly from the United States.

Sources used and checked in August 2023:

1. Foreign population in Spain
2. Cost of living Spain vs. U.S
3. Foreign Identity Number

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.