Buying a house on the Costa del Sol: the complete guide for international buyers

Start with your preparation, not with viewings

Most buyers start by scrolling through listings and then plan a viewing trip. That is precisely the wrong order. Before you view a property, you should know what you can and want financially: the total budget including the 10 to 14 percent additional costs, the form of financing and the purpose of the purchase.

Also decide whether you are buying for your own use, for rental, or for both. That completely changes the neighbourhood, the type of property and the tax approach. A property that is ideal to live in is by no means always a good rental investment.

Step 1: NIE and bank account

The practical basics consist of two things: an NIE number and a Spanish bank account. The NIE is your tax identification number and is mandatory for the purchase. You need a Spanish bank account to pay the notary fees, taxes and utilities.

You can set both in motion from abroad, preferably through a power of attorney granted to a Spanish lawyer. Start this early, because the waiting times for an NIE can grow and a purchase may otherwise be delayed.

Step 2: Arranging financing

If you want to finance, arrange clarity about your mortgage options in advance. Spanish banks usually finance 60 to 70 percent of the valuation or purchase value for non-residents, whichever is lower. The remainder plus the costs you pay from your own funds.

You can choose between a Spanish mortgage or releasing equity from your home in your own country. Which is more advantageous depends on the interest rate, the term and your tax situation. Have this calculated before you make an offer, so you know how firm your financing is.

Step 3: Searching, viewing and selecting

Only now does the searching begin. The Spanish market largely works through a shared system (Resales Online), which means a single good partner can show you almost the entire market. So you do not need to talk to ten agents.

• Make a focused shortlist based on neighbourhood, type and budget
• Plan viewings in clusters, for example eight properties in two days
• Pay attention to orientation, noise, the condition of the complex and the communal charges
• Ask about the annual comunidad charges (community fees) and the IBI (property tax)
• Visit the area outside the high season as well

Step 4: Offer, reservation contract and due diligence

When you choose a property, you make an offer. If you reach agreement, you sign a reservation contract and pay a reservation amount, often 6,000 to 10,000 euros, which takes the property off the market. Then comes the due diligence: your lawyer checks ownership, debts, permits and whether there are any illegal extensions or alterations.

Next you sign the private contract (contrato de arras), usually with a down payment of 10 percent. If you then withdraw without reason, you lose that down payment. If the seller withdraws, he must return double.

Step 5: The notary and the transfer

The purchase becomes final at the notary with the escritura pública, the notarial deed. There you pay the remainder of the purchase sum, often by banker's cheque, and you receive the keys. The notary draws up the deed and verifies the identities, but note: the Spanish notary does not advise you on the deal itself. That is the role of your lawyer.

After the transfer, your adviser arranges the entry in the land registry, the payment of the transfer tax and the transfer of water, electricity and the comunidad into your name. Only when all of that is settled are you truly finished.

After the purchase: the ongoing obligations

With the keys in hand you are not quite there yet. As a non-resident with a property in Spain you will face annual obligations: the IBI, the waste tax, the comunidad contribution and the Spanish income tax for non-residents (the modelo 210), which you pay even if you do not rent out.

If you rent out the property, tax on the rental income and possibly a rental licence are added. Arrange a good gestoría or tax adviser to handle these annual filings for you, so that you do not incur fines.