Important financial considerations when buying property in Spain

Buying any property is a huge financial decision, with many important aspects to consider. Financing your Spanish property – with the added layer of buying abroad – takes even more consideration and careful thought.

First steps

As soon as you know that you want to buy property in Spain or plan to move here, you will need to sit down and take a long hard look at your finances to work out exactly how much you can afford to spend – and how. You will need to consider the following:

• How you will fund the property purchase;
• How you will fund the property purchase;
• Your maximum buying price;
• How any pension or tax liabilities will be affected by your purchase;
• How you will make your payments to Spain;
• The cost of ongoing maintenance for your property; and
• The cost of living in Spain

The last thing you want to do is to only take into account the purchase price, and end up running out of money early.

Financing your property purchase in Spain

There are a number of ways of financing your Spanish property, all of which should be considered for their suitability carefully and thoroughly. We recommend assessing what you can afford from savings, the sale or re-mortgage of your UK property, or funding from the UK or Spain. It’s also important to seek the help of an Independent Financial Advisor (IFA) to run through all the different possibilities.

Budget for all foreseeable costs

In addition to budgeting for a realistic purchase price, it’s also a good idea to identify and plan for all the other costs involved in buying property in Spain – more often than not there will be more than you realise, and some of them will pop up unexpectedly.

It’s so important to spend some time assessing your options with financing your Spanish property before you make your purchase.

Transferring money to Spain

You will also need to consider how you are going to move your funds into Spain – unless, of course, you already have the euros you need in the country. If you are transferring sterling into euros, you will be affected by currency fluctuations, which can be very volatile, and have a dramatic impact on the price of your property.

The best way to maximise your budget when making currency transfers to Spain is to consult our recommended currency exchange specialists, Smart Currency Exchange, who can update you on currency market movements and recommend strategies to avoid losing money on your transfers when the markets move.

Tax liabilities

If you are already drawing your UK pension, would this be affected by your move, and what is the best way to ensure you can continue to reap from the full benefits? If you are working, how can you ensure that you do not pay tax in both countries? The best thing to do is consult a qualified tax advisor to discuss your particular situation and the various tax implications.

You will need to consider any tax implications of your property purchase or move to Spain, especially if you are moving over to your new home permanently.

Financial matters after your purchase

Once your property purchase has been completed, you will need to make sure you have planned and know how you are going to pay your mortgage repayments, as well as the ongoing costs to maintain both your property and your lifestyle in Spain. One area that is not always considered is the different cost of living in Spain compared to the UK, although you are likely to find that, generally, most things cost less in Spain.