Mallorca Property Buying Tips

Buying process
What stages are there in the completion process? The property is selected and the terms agreed on. The property must then be secured. This can be done through private contracts between the two parties. It is customary that 10% of the purchase price is paid at this time. On completion a deed of conveyance "escritura pública" must be signed by both parties under notarial supervision.

Financing a property in Mallorca

If a mortgage (a loan to buy a property in Mallorca SPAIN) is required this can be obtained either locally in MAJORCA through a Spanish or English bank based in MALLORCA or through a mortgage broker or bank in the UK or Ireland who specialised in providing (mortgages) loans to buy property in Mallorca Spain. The amount you can borrow is usually up to 70% of the purchase price of the property in MAJORCA SPAIN.

For example, the amount you can borrow against the property is generally up to 80% of the value or purchase price (whichever is greater) for residents and 70% for non-residents. In order to check that the purchase price is appropriate and fair, the bank will request a professional evaluation carried out by an independant firm. This comprises a detailed report in respect to the quality of construction and material used, the situation, state of repair, etc. of the property and, most important of all, its market price which takes all of the above in account. Mallorca and the properties for sale.

The fee for this is around €500. A search is also made in the Land Register and an official certificate of the corresponding entry to check it is clear of any existing loans or mortgages.

Additional fees are fairly fixed and vary little between mortgage brokers, building societies or banks in MAJORCA. For example Notary fees are established at a percentage of the loan. Thus, if the mortgage is €60,000 the Notary fees will be €500, etc. The Land Register fees, again, depend on the amount of the loan and for the same mortgage amount you can expect to pay approximately €250.

Finally, the amount of the home insurance in MALLORCA SPAIN is determined according to the minimum evaluation received and the current cost is approximately €10 per €10,000 insured.

Spanish banks normally take approximately 4 weeks to organise approval etc. Spanish mortgage interest rates are lower in MALLORCA SPAIN than the interest rates in England (UK) and Ireland (approximately 3.5% at the time of writing).

As a purchaser you may be required to provide a letter from your bankers to confirm that you have the necessary funds to complete the transaction.

You can ask our sales team for reputable MORTGAGE BROKERS IN MALLORCA, BUILDING SOCIETIES IN MALLORCA and SPANISH BANKS

Legal
Is it necessary to appoint a notary? Yes. Who pays the legal fees? In theory, notary's fees are paid by the seller, unless agreed otherwise and are fixed by law on the basis of a scale. It is advisable to appoint a local lawyer, who speaks the purchaser's language who will carry out a title search, and advise the purchaser on all aspects of the investment. Lawyer's fees are between 1-2% of the purchase price of the property. Estate Agents' fees vary depending on the state or region and also on the type of property. On the Costa del Sol, it is customary for the commission to be paid by the seller. The commission is usually a percentage of the selling price (although a fixed fee may be agreed between the seller and the agent) and this may vary depending on the price of the property.

Tax
Is there a purchase tax? On new residential buildings there is VAT (IVA) charged at 7% of the value, plus 1% stamp duty, and these are paid by the purchaser. However, on urban plots, commercial premises and some garages (not annexed to a home) purchased from developing or trading companies, VAT is 16%. On re-sales there is a property transfer tax set at 7%. In all cases there is a surplus value tax “plusvalia” (not to be confused with capital gains tax payable by the seller on the profit made when selling the property). In theory, “plusvalia” is paid by the seller, and is a municipal tax on the increase in value on the land only. However, it may be subject of negotiation between buyer and seller.
Registration
Is it necessary to register the new ownership? Yes, this is done by entering the deed of conveyance “escritura publica” at the land register office.

Ownership
Are there different methods of ownership?
Apart from individual ownership, a property can be owned by one or more companies. Owning companies can be Spanish, from countries with double taxation agreements with Spain or offshore or a combination of these.

Residence Permits
Is it necessary to have a residence permit?
No, it's not necessary for EEC citizens or citizens coming from the Swiss confederation. For non-EEC citizens, if they want to reside permanently in Spain, they would need to obtain a special visa at the spanish consulate in the country of origin which allows them to apply for a residence permit.

Selling property
A non-resident seller is subject to a 5% tax withholding on account of any possible capital gains tax. If the seller's liability is less than 5%, the seller can claim it from the tax office. Capital gains tax is 35% of the profit of the sale. There is an exception regarding the 5% retention: when the property has been owned by the vendor, at the date of the 31st of December 1996, for more than 10 years and when the vendor is an individual (not a non-resident company).

Professional advice:
The laws and people's personal circumstances continuously change. These questions and answers are only general, and we strongly recommend that you contact a professional lawyer or financial advisor. Our office would be delighted to recommend reputable professionals in both fields. We can recomend the bufete morell , lawyers & tax advisors in Palma de Mallorca.

Annual Property Taxes

I.B.I . (Impuesto Bienes Inmuebles)
This is a real estate tax levied by the local townhall and is usually 0.85% of the cadastral value (valor catastral)
Property Income Tax
It covers the period starting from Jan. 1st to Dec. 31st. of each year, and is payable during the following year (only for urban properties). The income rate is 25% and is applied on the taxable base. This base, which is the estimated income, is obtained by multiplying the cadastral value of the property by 2%. In some cases the multiplier is 1,1%: when the cadstral value has been updated after Jan.1st 1994; when the property has no cadastral value or the owner of the property has not been notified of this value, in which case the value to be adopted is 50% of the purchase price declared in the title deed, or that assessed by the tax office, whichever is the higher.

Property Wealth Tax
The non-resident owner of a property in Spain will be taxed on the value of the real estate on account of wealth tax. The base is taxed according to a sliding scale (between 0.20% to 2.5%). The taxable base will be the highest of the following values: a) The cadastral value; b) The value estimated by the tax authorities; c) The purchase price declared on the deed of conveyance.
Property owned by a non-resident company
When the owner of the property is a non-resident company, a special tax has to be paid and from 1996 the rate applicable is 3% of the cadastral value of the property (when there is no cadastral value, the same rule of the wealth tax is applicable).

Other taxes/expenses

Garbage collection tax.
To be paid to the local authorities.

Community Fees
These are fees to be paid to the Community of Owners for services and maintenance of communal areas, when the property is located in a development or condominium.
The above information is intended only as a guide and is subject to errors, omissions and changes. Their accuracy is not guaranteed.

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