Your guide to mortgages and finance in Fuerteventura

Montaña Roja Estate Agents are both a Fuerteventura Real Estate agency and a Costa del Sol property developer and we pride ourselves on our commitment in helping you find your perfect Fuerteventura investment property or new home abroad. Our fully trained multilingual staff are always on hand to help and offer advice on purchasing your overseas property.

If you are looking to purchase Fuerteventura property, then please read the following information that we have put together for prospective purchasers regarding Fuerteventura mortgages and taxes.

The smartest way to buy a Fuerteventura property is with a Spanish mortgage. Spanish Mortgages are a lot easier to arrange these days compared to ten years ago due to many of the banks not being geared up for foreign property ownership. Now, however, many Spanish banks have more than reasonable mortgage rates and many of the UK lending banks offer Spanish Mortgages through their Spanish Branches and affiliated banks. Spanish mortgage rates are comparable to those offered in the UK but can often be far more favourable than UK rates.

Banks in Spain will only consider granting a mortgage to an applicant who can prove taxable income to cover the repayments which should not exceed 30—35% of the net monthly income. They are not interested in other assets or the value of any other properties you own or money in offshore accounts, although some will consider long-term rental income if backed by a legal contract. Mortgages usually have to be repaid by the age of 70.

There is no such thing as a 100% Spanish Mortgage, most Spanish Lenders will expect or require you to put down a deposit of at least 20% of the purchase price. Some banks may even require you to put down as much as 50% of the value as a deposit. Generally residents can achieve mortgages of up to 97% on valuation and non-residents can achieve up to 80%. Mortgages can be obtained for a term of upto 40 years.

Applying for a mortgage is as straightforward a process as in the UK. A number of documents must be presented to the Spanish bank in order to make the transaction a smooth one. Originals of everything will need to be shown and copies will be taken at the bank of your passport or driving licence, if employed: past three months' payslip's, latest P60s, if self-employed: last three years audited accounts, tax returns and accountant's reference.

You should be prepared to pay a 10% deposit on a resale property and from 25% of the full purchase price if you're buying a new property direct from the builder or an off plan property. You will also need to apply for a national identity number (NIE number) and to open a Fuerteventura bank account both of which are easily done.

Purchase of property in Fuerteventura must comply with Spanish law and Montaña Roja Real Estate are able to take care of all the conveyance requirements for you, which means that you will not incur the extra costs of hiring a separate solicitor. A legal contract is made out at the same time that the deposit is paid and a completion date is also set at that time. The completion date is normally about 4 weeks after the contract date for cash buyers, and 8-10 weeks after the contract date if a mortgage is required.

All property purchase agreements have to be signed in front of a special lawyer known as the Notary and the fees for this are usually a small percentage of the purchase price. In addition to the cost of your new property there is an approximate 10% to be set aside for taxes and costs. this includes 5% I.G.I.C. (VAT) plus 0.5% stamp duty when purchasing a new property, 6% ITP tax for a resale property, Notary Fees, Land registry costs and Plus Valía (Capital Gains Tax). To cover these additional costs, it is recommended that you allow an extra 8% - 10% of the purchase price in your calculations.

In order to complete on your property purchase, you and the seller must both sign the documents in front of the Notary. Before the Notary will allow you to sign the documents, he will check to see that there are no outstanding debts on the property. This means that, various documents need to be produced, including proof that the final bills have been paid for water, electricity, community fees and council tax. A Land Registry check is also carried out.

Make sure you get a copy of the Escritura, this will show who the true owner/s are and define exactly what is being purchased. Nota Simple, which confirms current ownership and shows any mortgages or embargoes on the property community administrator, checks for any outstanding fees that need to be taken into account; Hacienda, checks there are no outstanding taxes and that previous wealth tax submissions were made; Town Hall to check that the annual Municipal rates have been paid up to date; Contract of Sale for the 'completion time', the 'escritura' value and the 'title deeds', which will tell you the furniture inclusion and other conditions of the sale. Finally, bear in mind that your lawyer will charge fees for his professional services, and these will normally range from 1 % to 2 % of the price plus VAT (currently at 5%).

Once the balance of the monies have been paid and the deeds have been signed by both parties in front of the Notary, the keys can be handed over and the property will be yours.

For more detailed mortgage or tax information please contact us and speak with a Fuerteventura advisor.

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