THE BUYING PROCESS
Tips and advice about the process of buying a property in Spain.
The (Mostly) Definitive Guide to Home Insurance.
You’ve already done all the hard work.
You searched endlessly for your dream home, negotiated the price, and got all of your financing in order. But before you turn the key on your new life, you need to protect your investment—and everything inside of it.
Even if you have never shopped for home insurance—or if you just haven’t purchased a new policy in a while—there are a few things to keep top of mind as you navigate the course.
How much is this going to cost?
We get it—you already plunked down a gut-wrenching amount of money for the house and the fees and the closing costs. Now you have to shell out more cash for insurance? No, it isn’t fun. But you got to do it. And it all starts with the premiums.
Your annual premium is the amount an insurance company will charge you every year to cover your home and its contents in the event of fire, theft, etc.
Every insurance company has its own way of determining annual premiums,
A few factors set your rate: the value of your home and its contents, as well as your deductible, which is the out-of-pocket amount you’ll have to pay in the event of a claim. But home insurance premiums also vary by region and company. Two home insurance policies with identical coverage and limits in two different parts of the country, or even a town, could have very different annual premiums.
Filing a home insurance claim within the past five years also increases the amount you’ll pay.
“To an insurer, that increases the likelihood you’ll file a claim,” Bank says.
And, of course, Mother Nature plays a role. If you live in an area with a history of weather catastrophes, you can expect to pay more.
How you’ll pay
The initial premium is typically due when you purchase the policy. That will cover your home and property for the first year.
Subsequent premiums can also be paid directly by you (your insurer will bill you), or you can opt to escrow the premium and have a portion of it built into your mortgage payment. Even though that bumps up your monthly costs, you might find this the best way to ensure you have enough money to cover the premium when it’s due.
Timing is everything
It’s never too early to start shopping for home insurance. Gathering quotes as soon as the contract is signed will help you understand how the annual premium will factor into your budget. You need to know all of your monthly costs.
You’ll want to choose a policy and have it paid in full at least two weeks before closing—otherwise you might face insurance-related delays, And you don’t want disaster to strike during the one week you aren’t covered. Because, well, that’s how luck works sometimes (at least with us).
Know whom you’re working with
An independent insurance agency or broker deals with several companies, versus captive agents who represent just one insurer. Obtain a mix of three to four quotes from both types of agents to compare premiums (even from the same companies) and coverages available. It’s a fine idea to shop around.
Take inventory
As you’re packing and/or unpacking, take videos or photos of your belongings and store them in the cloud as a digital home inventory. That will help speed up a claim and ensure the maximum possible reimbursement in the event of a fire, theft, or other covered disaster. An inventory will also help you decide which insurance policy will give you adequate coverage for your belongings, including furniture, electronics, and collectibles.
Ask about add-ons
Speaking of collectibles, if you own jewellery, artwork, wine, coin or stamp collections, or other keepsakes, talk to your agent about coverage limits related to those items.
To ensure complete protection, those may require a special rider, which increases the coverage limits as well as the annual premium .
Get your docs in a row
You’ll need a copy of the “insurance binder,” which details the coverage values, premiums, and restrictions. But you shouldn’t have to track down that information. Your agent should work directly with the mortgage lender to provide proof of coverage required at closing.
The Purchase Contract.
The purchase contract for a resale property will contain details of the vendor and purchaser, the purchase price and method of payment. It will also confirm that the Escritura de Compraventa (Title Deeds) is in the name of the vendor and that this will be passed to the purchaser on completion of the sale.
It will also guarantee that the property itself will be transferred free from all encumbrances and rights of third parties and will state who is liable for taxes and costs involved in the transfer. There will also be stipulations regarding penalties for non-fulfillment of the contract.
The purchase contract for a property still in construction will contain similar details and normally further information regarding ownership of land, building permissions, completion dates and the setting up of a community, etc.
Often contracts are written in English and sometimes they are in Spanish with an official English translation. Your estate agent should go through the contract with you and clearly explain any details that you do not understand. If you are not sure of any clauses in the contract, or have doubts about the fairness of the stipulations in the contract, then do not sign it.
You can still pay a holding deposit to secure the property and let your legal advisor vet the contract before you sign. As stated earlier, no reasonable developer will refuse to refund a holding deposit should a solicitor find any legal reason why you should not proceed. Good estate agents will only deal with reasonable and reliable developers.
Currency Exchange.
Buying a property in Spain (or abroad) is an expensive process which most of us may only do once in our lives. It is probably the largest expense you will make apart from on your current home. Buying abroad can be fraught with complications but one of the main factors associated with purchasing abroad is often not given enough attention…changing your money into Euros.
Currency forms the basis of many discussions as most people are unsure of which options are open to them and which is the most cost effective. Most people seem to rely on their bank for transferring money but this could potentially be costing them thousands. When transferring thousands of Euros to Spain for your dream property you really do need to look into this whole currency subject in a bit more detail.
As we at 4eversSpain are no experts in this matter, we decided to to enlist the help of one of the largest and most respected currency exchange firms, Moneycorp, to explain what you should consider when converting your hard-earned money to Euros and transferring that money to Spain:
When you’ve found your dream home or investment overseas, you will need to perform one or more currency transactions. Don’t rely on your bank to buy your currency. You could potentially make huge savings by using a foreign currency specialist like Moneycorp who can offer you a better exchange rate and a more specialised service.
Customer service and expert market knowledge
In addition to offering you the best exchange rates, Moneycorp offer a very personal service tailored to your individual needs. Their experienced and friendly team are always available to help answer any questions you may have, no matter how obvious they may seem!
Always remember it is impossible to predict future currency movements, although Moneycorp analysts are recognised worldwide and Moneycorp is ranked as one of the world’s most accurate FX forecasters according to the Reuters monthly Forex Poll. Once registered with them, you will be assigned your own dealer who can explain the risks, inform you of market sentiment and explain how to protect yourself.
Why is understanding about currency volatility so important?
At Moneycorp they understand that buying or selling large amounts of currency can often be very daunting. It is important to understand that if you are buying abroad, you are exposing yourself to “currency risk”. Currency movements can make a big difference to the final amount you end up paying for your property because of the time it takes to complete the purchase and subsequently, this could cost you thousands of pounds.
‘Spot’ and ‘Forward’ currency contracts – Remove the risk
If you have all the money available to purchase your property abroad you may prefer to fix an exchange rate to secure your costs. You have a number of options. You can do a “spot” trade. This is where you buy all the currency now and your Currencies Direct dealer will hold it on your behalf and transfer the funds abroad when you need them.
However, if you do not have all the funds available yet to buy currency on a Spot contract but you are worried that future exchange rates might increase your costs, you can still play it safe and buy a “forward” contract. To do this you only need to have access to 10% of the funds initially. It is simply a mechanism to “buy now, pay later” where you are no longer exposed to currency movements.
Making Regular Payments Abroad?
Once you have bought your property abroad, like many people, you may still need to buy and transfer money on a regular basis. Whether for mortgage payments, property running costs or living expenses, you can save time and money with Moneycorp (Regular Payments Abroad ) service. You can fix an exchange rate for up to 2 years, establish a direct debit with your UK bank and send the currency abroad for no charge. Complete peace of mind.
We hope that that this information helps you understand your options better regarding currency exchange.
Legal Advice.
So often, when first time buyers discover their ideal holiday home they are full of excitement and eager to become the new owner. In their euphoria, they throw all caution to the wind instead of proceeding with care.
It is sometimes difficult to determine how far an estate agent should go in protecting the buyer against every possible pitfall that could be encountered in his purchase. A good agent for example, ensures that a developer owns the land upon which he is building and that he has permission. The agent’s knowledge of the developers reliability, past record and financial stability can be invaluable if put to good use. The agent can arrange a search at the land registry on behalf of the purchaser and can make sure that the purchase agreement is fair and that the purchaser fully understands it.
All this gives some security to the purchaser, but who ultimately takes the responsibility?
All prospective purchasers should ask themselves if they would purchase a property in the U.K. without the assistance of a solicitor. If the answer is “no”, then why should they purchase in a foreign country where the language and laws are different, without taking professional legal advice. Even if the agent has done a thorough job of checking everything and a solicitor simply confirms that, what price can you put on peace of mind?
When a prospective purchaser finds his ideal property, invariably he needs to pay a holding deposit to secure the property and the price. No reasonable vendor would disagree to this deposit being fully refundable should a solicitor find any legal reason for the sale not to proceed. On a resale property, this holding deposit can be held in the estate agent’s client account for additional security or could be held by the vendor’s or purchaser’s solicitor by mutual agreement.
If an estate agent advises you that you do not need the services of a lawyer, then this should act as a warning sign to ‘Beware’, and you should conduct your search for a property elsewhere.
When choosing a legal advisor you should use an ‘abogado’ (Spanish lawyer) who speaks fluent English. You should also ensure that he has an insured bonding for the work that he does, as this is not a legal requirement in Spain as it is in the U.K. for solicitors who do conveyancing work there.
For a number of years now, we have recommended the services of Mercedes Flores Miron Lawyers, based in Albox – Almeria which is an independent English-speaking office, specialising in conveyancing and bonded work. We have negotiated a low rate of fees for our clients and Mercedes Flores Miron Lawyers, have been a major contributing factor to 100% of our clients receiving clear and unencumbered freehold title deeds to the property that they purchased.
You are; of course, free to use any lawyer that you so wish and the British Consulate can give you a list of qualified lawyers who speak English.
Mercedes Flores Miron, C/Duque de Ahumada, 33 – Bajo – 04800 Albox Telf: 950 120 553
Spanish Lawyer.
With such an overwhelming number of property lawyers in Spain, it is often impossible to know who will provide you with the level of service that you expect.
You need a genuine property lawyer that truly has your best interests at heart. This can often be difficult to find, as it is difficult to differentiate one from another.
Here’s where we can help you. We have established relationships with a select few property lawyers in Spain that we are pleased to be able to recommend to you Mercedes Flores Miron. These property lawyers all conform to standard 4everspain’s guidelines:
• Fair and ethical approach in dealing with customers
• Independent
• Established
• Financially secure
• In-depth market knowledge
• Verified client feedback
• Full after sales support commitment
• Most importantly speak English
• Live locally, so know the area and the developers and are familiar with the legislation
From our experience we have no hesitation in recommending the following lawyers
Mercedes Flores Miron
C/Duque de Ahumado,
33 – Bajo
ALBOX
Almeria, Spain
tel: 0034 950 120 553 Fax: 0034 950 120 920
e-mail: mercedesflores@telefonica.net
The Notary.
All property sales and purchases in Spain must be registered in a local deed registry and the Title Deed (Escritura de Compraventa) must be prepared by a public official called a Notary. This deed is then signed by both the seller and the buyer in the Notary’s presence.
A Notary is a lawyer who has had special training and passed extra examinations to qualify him for his special duties which cover a large range of legal matters. Apart from dealing with all property transactions, he sees that Spanish wills are properly signed, witnessed and registered, authenticates important documents and certifies due service of legal notices. He is a very important official.
The Notary is responsible for seeing that the conveyance deed is drawn up correctly and fully describes the property and that the agreed declared purchase price has been paid to the vendor in the appropriate currency. He witnesses the signing of the deed and collects the fees and taxes. The deed is then sent to the Land Registry Office where the name of the new legal owner is registered. It can take some time before the title deed comes back from the Land Registry Office, and in the meantime an authorised copy is given to the purchasers.
If you do not wish to return for the signing of the deed, you can appoint someone as your agent (usually your Lawyer) to appear before the Notary and sign on your behalf. This person must be officially appointed by a deed which in England is called a “Special Power of Attorney” or in Spain, an “Escritura de Poder de Compraventa”. This deed can be prepared by the Notary as soon as you have agreed to buy and normally would be in the name of your lawyer who is doing the conveyancing for you.
As part of our client services, 4ever Spain will make sure that all legal procedures are adhered to and assist your lawyer and the Notary to ensure a smooth completion without you having to worry about anything.
The Community of Owners.
The majority of people who buy a house or apartment in Spain will find themselves a member of a Community of Owners. The law covering the legal rights and obligations of owners is contained in part of the Spanish Civil Code called the Ley de Propiedad Horizontal, the Law of Horizontal Ownership.
This law applies to separate houses or terraced properties and to developments of high-rise apartments where the ownership could be said to be vertical as well as horizontal. Whatever parts of the buildings are jointly owned, or where there are gardens or swimming pools common to all, and when owners share the cost of maintenance and services, then there is “horizontal ownership” and this law applies.
It enables a Community to run democratically in accordance with the wishes of the majority of owners and is government of the people by the people for the people.
The law requires that every Community should have its own regulations and defines what parts of the Community property belong solely to individual owners and what parts all jointly own.
The share of each owner in the common property is clearly stated, dependent on the size of the owners’ dwelling in comparison to others. The share of each owner is called “cuota de participación” and is important in that it determines how much he will have to pay towards the cost of maintaining the common property. That is roads, gardens, walkways and swimming pool, and providing payment for the necessary services such gardeners, cleaners, reception staff, refuse removal, etc.
An Owners Association is created to co-ordinate the smooth running and upkeep of the development. Also, to represent the needs and rights of the owners. A President and Administrator are elected together with a committee of owners and a General Meeting is held each year. At this, meeting members seek to clarify or establish new rules and regulations. To appoint or reappoint an administrator. To approve a budget for the coming year. To elect a President for the coming year, and to deal with any other matters raised by the committee or owners.
Because it takes time to organise a meeting of owners and these services are required immediately. The developer normally hires the administrator for the first year. Who then looks after the running of the complex until the first Annual General Meeting. If during this time his performance has been satisfactory, then he would normally be re-engaged until the next A.G.M.
It must be remembered that Spanish law considers that the obligation of each owner to pay his share of Community expenses is an obligation superior to all others. The amount of Community Fees payable is dependant on the type of development and standard of upkeep.
Spanish law provides the answer to practically every problem that is likely to arise in a Community, but owners must look after their own interests, attend meetings and vote.
Need Help Buying.
Buying a home in South East Spain can be an excellent investment. The property market in this area is one of the most active in the country, and generally property values have risen significantly during the last few years.
For the first time buyer in this region, the buying process can seem complicated and quite overwhelming.
In general, the steps in the property buying process are:
* Knowing how much you can afford
* Defining your needs and interests, ie. type of property, number of rooms etc.
* Selecting an area you want to live in, remember it’s all about location, location, location.
* Contacting a reputable estate agent, only deal with an agent that you feel comfortable with, and who meets all your needs.
* Familiarize yourself with the sales contract that will be used. Understand your obligations and rights as stated in the contract.
* Throughout the buying process, never sign a contract or any other documents you do not understand or do not feel comfortable with.
Therefore, your first step is to contact 4everspain.com, then we will be able to provide you with valuable advice on all aspects of the property buying process.
Assistance would include matters such as finding an appropriate property, financing options, questions to ask when visiting properties, negotiating a sales contract and home inspection requirements.
The main differences between Spanish and UK Mortgages.
Although the overall principal of successfully applying for a mortgage is the same in Spain as it is in the UK, there are a few differences between the 2 products that it pays to be aware of.
Any mortgage that will be offered to you is likely to vary considerably from bank to bank and often a Professional Mortgage Broker can be the best person to help you cut through the bureaucracy and industry jargon and to help you to find you some good offers to compare and consider before submitting the application on your behalf.
Just a few of the differences that you will need to take on board when you are considering submitting a mortgage application are listed below :
• Mortgages issued by Spanish lenders are usually done so on a repayment basis. In other words the loan and the interest applied to it are simultaneously repaid by equal installments over the term of the loan. Other loans such as Endowment. Pension, Interest only and PEP Mortgages are largely unheard of.
• Early repayment of any mortgages are often restricted and in many cases even penalised.
• The whole application process from initial application through to completion of the purchase is a far more time consuming, complicated and stricter process than in the UK.
• Usually Spanish mortgages are offered on a 15 year term, as opposed the standard 25 year term in the UK, however some lenders offer terms between 5 and 25 years, but these are few and far between. These loans generally have to be repaid in full by your 70th Birthday – in some cases the 65th.
• Fixed rate loans, where the interest rate remains constant throughout the term of the loan, are more popular and more widely offered in Spain than in the UK.
• The loan amount permitted is calculated differently than it is in the UK, and whilst it can vary from lender to lender, it is usually calculate so that the mortgage repayment will be no more than 30 – 35% of your monthly nett disposable income.
• Some Lenders will not issue mortgages on rural properties, some will not lend on properties that are value under a certain amount and some will have a minimum loan value of around 20’000.
• Staged repayments on New Build Properties and Restored Properties is calculate completely differently than it is in the UK.
• There is no mortgage deed as there is in the UK – Instead any such mortgage will be mentioned on the Escritura for the property and signed in front of the Notary.
– Everybody’s circumstances are different and it is recommended that professional advise is sought as soon as you decide to purchase a property in Spain – it can often be a good idea to do this before you have even found a property that you like so that you can be sure of the amount that you can comfortably borrow.
Courtesy of tumbit.com
N.I.E. Number.
Before You Can Buy a Property in Spain, You Must Have an NIE number – Numero de Identidad de Extranjeros, which, translated, means “Identity Number for Foreigners”. We can help arrange this for you.
NIE Application Regulations
Spain has updated the regulations governing NIE applicants; it is now official policy for all new foreigners wishing either to reside or buy property in Spain to complete an EX18 NIE form, regardless of whether or not they are buying property for a permanent residence or a holiday home.
Obtaining an NIE Number
All resident and non-resident foreigners with financial affairs in Spain – regardless of whether they are EU citizens or from a non-EU country – must have a foreigners tax identification number or NIE (Número de Identificación de Extranjero) which serves as a fiscal identification number.
For anyone looking to buy property in Spain, the NIE number is an essential requirement. Many people do not even realise they need one, usually because of being poorly advised. If both husband and wife intend buying property in joint names then it will be necessary for both spouses to acquire NIE numbers before they can sign the deeds of sale (escritura) in the presence of a Spanish Notario.
Delays in obtaining the NIE can have serious consequences and will almost certainly result in delayed completion dates. If you are applying for a NIE number, you need to apply in person now. For this reason, we always recommend that the NIE number be obtained at the first possible opportunity.
An NIE number is needed for:
Buying or selling property
Opening a bank account
Applying for a mortgage
Payment of Spanish taxes
Buying a car, apply for a driver’s licence
Register with social services and arrange receipt of social security benefits
We recommend that you use a lawyer because if you don’t you will have to join the queue whereas a lawyer who knows the system may well be able to help you to jump that queue, and that queue could be very long. We will help you with these arrangements