Minimise Your Currency Risk: Buying Your Dream Property in Spain
Spain is a popular destination for buying property and the country is known for its delicious cuisine, warm climate, and relaxed way of life.
Whether you're purchasing property in Barcelona, the Costa del Sol, or the Balearic Islands, Centura FX provides foreign exchange services to assist in minimising overseas currency risks and assist in maximising the value of your property transaction.
Here's a guide to buying a house in Spain.
Make an offer
After seeking assistance from an estate agent to search for and view potential properties, the next step is to submit an offer for your preferred property. The estate agent will leverage their professional knowledge to guide you through the necessary negotiation process involved in making an offer on a property.
Obtain an NIE Number (Foreigner Identity Number)
To purchase a property in Spain, you'll need to obtain a foreigner's identification number or "Número de Identificación de Extranjero" (NIE), this number is required for any financial transactions in Spain, including buying a property. You can get this number at a Spanish embassy or consulate. There are two types of NIE numbers: the temporary NIE number if you don’t want to live in Spain and the resident NIE number if you do want to live there.
Appoint a Notary
Once you've found a property, you'll need to appoint a "notario" (notary). A notary is a legal specialist who will draw up contracts on behalf of the buyer and seller. They ensure the legality and authenticity of the deed and provide complete information on the agreement's nature and consequences. Notary costs can vary depending on the property's age, ranging from 0.5% to 2% of the property's value, excluding estate agency fees. The buyer pays for notary costs, and if there are two notaries involved, the costs are split 50/50.
Sign a Reservation Contract "Contrato de Reserva"
A reservation contract needs to be signed, which involves a deposit of around €3,000 to €6,000. This deposit ensures that the property is taken off the market, and the seller agrees not to sell the property to anyone else. The reservation contract is usually valid for 30 days and there are two types of contracts, ‘Contrato de Reserva’ which removes the property from the market and ‘Contrato de Arras’ which is the contract that involves the two parts formalising the purchase of the property.
Get your mortgage confirmed
If you're not purchasing the property outright, you'll need to arrange financing through a financial provider/bank. This will require documents such as proof of income, employment, and assets. They will also carry out a property valuation to ensure that the loan amount is appropriate for the property's value.
Sign a Private Purchase Contract "Contrato Privado de Compraventa"
You'll then need to sign a private purchase contract or "Contrato Privado de Compraventa". The contract outlines the details of the property purchase, including the sale price and any conditions of the sale. At this stage, you'll be required to pay around 10% of the purchase price. Costs may change between 20% and 50% if you are buying the property off-plan.
During the period between the seller's acceptance of the offer and the payment of the deposit, currency fluctuations may impact the deposit amount and result in potential losses.
For example:
A buyer needs to make a 10% deposit on a property worth €300,000 Euros (€30,000).
If the GBP/EUR exchange rate is 1.15 EUR, the buyer’s deposit is £26,086.96. However, if the GBP/EUR exchange rate moves to 1.10 EUR before the deposit is made, the buyer would need to pay a higher amount of £27,272.73.
You can use forward contracts to manage the risk of currency fluctuations by fixing an exchange rate for a specific period, thus eliminating the uncertainty of potential currency movements.
Final Contract “Escritura de Compraventa"
Once your financing has been arranged, the final contract or "Escritura" can be signed. This is a public deed that legally transfers the property's ownership to the buyer.
It is important to note that and any other fees including taxes, will need to paid by the buyer.
If you’re buying the property outright, the remaining balance of the property price depending on the deposit paid along with the fees must be paid to notary's escrow account.
Currency fluctuations during the period between paying the deposit and settling the final balance can also result in financial losses.
For example:
A buyer needs to pay the remaining a 90% deposit on a property worth €300,000 Euros (€270,000).
If the GBP/EUR exchange rate is 1.15 EUR, it would cost the buyer £234,782.60 However, if the GBP/EUR exchange rate moves to 1.10 EUR before the deposit is made, the buyer would need to pay a higher amount of £245,454.54.
Forward contracts can help you manage currency risk by allowing you to fix an exchange rate for a set amount of currency, to be delivered on a future date. This eliminates the uncertainty of potential currency fluctuations.
Congratulations!
You now have the keys to your new Spanish property!
Get in touch with us!
Centura FX offers currency services for overseas property transactions in Spain. Our competitive exchange rates and risk management strategies help minimise currency volatility and can assist in maximising the value of your property transaction.
You can arrange a call with one of our specialists or contact us directly by calling 0203 871 9830.
Congratulations, you are now able to collect the keys to your new French property.