How much does it cost in fees to buy a property in Spain

This is a simplified overview of costs related to buying a home in Spain. Brokers will usually provide more detailed information.

Overview of costs:

• Currency costs
• Borrowing costs
• Bank charges
• Lawyer/Manager costs
• Brokerage costs
• Transaction costs/tax
• Costs around NIE, Spanish tax ID
• Insurance costs

Currency exchange costs

Currency exchange is one cost where you can quickly save thousands if you are a buyer from a non-Euro country. High street banks will be willing to make an offer on exchange rates and fees for bigger transfers, so ask for an offer before doing the exchange. Another alternative is to use a currency exchange service, many British people have a good experience with Currencies Direct when it comes to property transactions, they have offices in Spain and are one of the largest providers in the market.

Timing the market is not easy, it is impossible to say what the rate will be in, say, 12 months. If the exchange rate is not in your favour then you might want to consider a loan in euros which can be paid off when the rate is at a more comfortable level. But loans in Spain involve a number of extra costs, so you have to consider what is worthwhile. The alternative is to wait to buy until your currency has strengthened. Rent to buy can also be an option, some sellers will accept renting for a year and then complete the purchase. If you buy a home under construction with a partial payment, your currency can strengthen through the construction process, but there is of course no guarantee, it might also weaken against the Euro.

Mortgage costs

Loans in Spain are complicated, which is why many choose to use a mortgage broker that knows the market and can find the best offer. This of course comes with a cost, often combined with a fixed amount plus a percentage of the loan amount.

Not all banks charge a fee when you set up the loan, but you can expect to pay up to 2% of the loan amount. If you use a mortgage broker, their percentage is paid from the bank fee. This also means that when using a mortgage broker you cannot negotiate down the start-up fee to 0%, which some banks will accept, but you have the benefit of better conditions that may make using a mortgage broker worthwhile.

If the home you are buying needs a valuation report (typically required for all previously owned homes) the bank should pay for this, but you still see cases where the buyer is required to cover this cost. Costs are usually between €250 and €600.

The bank will try to sell you life insurance when you take out a loan. You should note that you are free to buy this from other providers who are often more competitively priced, but the bank may then charge you a higher interest rate on your loan. Insurance sold by a bank can easily be twice the market price.

60-70% of foreigners who buy property in Spain do not take out loans from Spanish banks.

Bank costs

If you have a loan from a Spanish bank, you will often get free banking services. If, on the other hand, you do not have a loan, you will have to buy products from the bank to get free banking.  Additionally, you are often required to exceed a minimum transaction volume through your account each month. This applies even to Spaniards. Spain's most expensive banks charge €240 per year for basic banking plus additionally card fees. Products such as insurance are usually significantly overpriced by Spanish banks.

Some real estate agents charge a fee to assist with opening a bank account in Spain. We have heard some charge up to €500 for this service, yet the customer has to arrange all the practicalities themselves at the bank. If your agent joins you at the bank, it may take a few hours but you should not pay more than 1-200 euros. If you do not need a loan in Spain, you can easily open an account online with, for example, Bueno, the online banking alternative in Spain.

Attorney/Gestor costs

You are not required to use a lawyer when buying a property in Spain, but in many cases, it can be a good idea to engage a lawyer. The alternative is to use an accountant, referred to as a Gestor in Spain. They can assist you with a number of practical matters. A Gestor will cost a few hundred euros whereas a lawyer may cost a few thousand euros.

The notary who carries out the actual transaction will check that the property is free of encumbrances. However, there are many other factors that may be good to check and confirm. For example, whether extensions are legal, plot boundaries correct, any changes in local development plans. These are usually topics a lawyer can assist with. 

Not all data is available online so a full check of a property will require a visit to one or two offices. A full check is most critical for a detached home.

Please note that housing in 'rural' areas (countryside) comes with many more elements of uncertainty, limitations and perhaps unclear/lack of documentation. Using a local lawyer is essential in these cases!

Real estate agent costs

Costs and how they are shared vary. In larger cities, such as Madrid, it is more common for a 3% real estate agent fee and for the seller to cover this. The seller can write off the cost if the home is sold at a profit, so it is reasonable for the seller to cover this.

In popular areas for foreigners, the real estate agent cost is often 5-6% and this is then shared between the seller and the buyer. Often there is more than one broker involved and they will then share the commission. 21% VAT is added to the cost.

A simple example, a €200,000 home purchase and 6% cost, then the fees are:

• Seller pays €6000 (3%) + €1260 (21%IVA) = €7260
• Buyer pays €6000 (3%) + €1260 (21%IVA) = €7260

When buying directly from the builder, there should be no sales cost, but there are probably builders who will try to add extra fees. You should be able to negotiate away this cost.

Transaction costs

There are many costs when buying a home in Spain, and these vary whether you buy a new or used home. They also vary between the different regions.

The notary is the one who carries out the transaction itself and reports it to the land register (Registro de la Propiedad). The notary fee depends on the price of the property, for an apartment costing €250,000 the fee will be around €1,000.

All housing transactions must be reported to the land register. The prices are set by the government and vary from €400 to €700.

If you buy a new home, you must pay 10% VAT on the purchase price, a home for €250,000 will then cost you €25,000 in VAT. You must also pay a document fee, see below for the cost in your region.

When you buy a second-hand home, you must pay tax on the transfer of the home from the seller to the buyer (Impuesto sobre Transmisiones Patrimoniales). Costs vary between regions, Valencia charges 10%, Andalucia 8%.

Costs around NIE, Spanish tax ID

You must have a Spanish tax ID (NIE), to buy and own a property in Spain. It may also be appropriate if you have a long-term lease. Some landlords will require NIE. Every person who will be on the deed as an owner must apply for a NIE.

The price to apply for a NIE in 2023 is €9.84. The application is in most cases submitted at the local National Police station in Spain, but you can also apply via the Spanish embassy in many countries (you need to meet in person at the embassy). We recommend asking your real estate agent for help, or a Gestor (accountant/fixer), this will save you a lot of time. The price for assistance is usually around €1-200. We have heard of people who have paid €500 per person, that is too much. You can find better offers through a search on Google.

You can authorize another person/company to apply on your behalf. This increases the cost.

Please note that there may sometimes be a delay in receiving the NIE because of demand. Keep in mind that a purchase cannot be completed without a NIE, so start the application process earl.

Insurance

You must have property insurance on your Spanish home. The cost varies based on size, location and other factors. In addition, insurance sold by a bank will often cost 30-40% more than if bought directly from an insurance company. For a detached house, you can expect to pay a few hundred euros. For an apartment, expect to pay from around one hundred euros.

Claims settlement in Spain can be demanding, it is rarely like in the UK. A local joke is that insurance in Spain is something you only pay into, i.e. you never get anything back. It is of course not so black and white, but many have challenges with getting their insurance companies to cover damages. There are of course better companies and sunshine stories too, and insurance is a must anyway.

Some final words

There are many costs to consider when buying a property in Spain. It is important to consider these from the start since getting an extra cost of 12-14% when you take over the property is not particularly pleasant. Although the housing market has been strong in recent years, you can often haggle on used homes and in this way save perhaps 10-20% which can go towards the costs.

Most people who buy property in Spain have a long horizon, 30-40 years. If this is the case for you, then the price today may not be as important as your perfect choice of home, since historically property has tended to be a good long-term investment. The quality of life you get with a home in Spain also outweighs much of the cost.

Letting out the property can be a good way to finance your Spanish dream. Local real estate agents can assist you with information about the rental market. Many will also manage rental for you.