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Property Purchase - Spain: - Continued.
So, you have found the property of your dreams and now you want to get moving on the financial side of things and ensure your name is secured on the deeds. The next few lines explain the next steps in the process:
Payment terms and contracts
The normal procedure in Spain is to reserve the property with a deposit, to give you time to gather the funds. Here is the typical breakdown for reserving and paying for off-plan and resale property.
Off-plan payment terms
You will be required to pay a reservation contract to reserve the property for a time period of one month. Within one month you will pay 30% plus taxes (minus the your deposit you have already paid) of the agreed sales price and sign the purchase contract.
Once the property is finished and the terms of your purchase contract have been met by the developer, you will pay the final 70% plus taxes and sign the property’s Escritura (title deed) in front of a notary public.
Resale payment terms
To reserve the property you will sign the private purchase contract that agrees the terms and date for the completion of the sale and then pay 10% plus taxes, of the agreed sales price to the vendor’s lawyer’s escrow account.
Once the terms set in the purchase contract are met, you will be expected to pay the final 90% plus taxes and sign the property’s Escritura in front of a notary public.
The above payment structures are merely a guide, developers are commonly more flexible than this and resale scenarios are down to the negotiation between you and the vendor. For instance, a vendor may accept a reservation fee to give the buyer more time to prepare the finance required for the 10% deposit for the purchase contract.
On all reservation payments we advise you to pay directly to the vendor’s lawyer or to a bonded or escrow account that has been set up for this purpose. Always try to avoid paying the money directly to the seller.
Paying for your property
When you agree to buy a Spanish property you will have agreed the price in Euros. The actual cost in GBP Sterling of the property depends upon the best exchange rate that you achieve to buy the Euros. People are often shocked by the cost implications of a sharp move in the exchange rate actually make to their bottom line. Once your offer on your property is accepted you are exposed to a currency risk until you secure a price to buy Euros. If you wait until funds are actually required in Spain, the cost of the property will fluctuate on a daily basis (either become cheaper or more expensive).
Don’t take a Currency Risk
To illustrate this we can look at an historical example: A villa priced at 400,000 euros would have cost £266,666 at the end of June 2005 but increased to £279,720 by the end of July (4.7% in just 4 weeks). This is unnecessary and easily avoided. It goes without saying that the reverse could happen and your property could become cheaper if the Euro were to weaken but if you are happy with the cost at the start you would be well advised not to speculate and risk paying more.
You would not entertain speculating on currency when buying a home in the UK so why take a chance when buying in Spain! You have several ways of buying Euros. You will have to buy the deposit for the property straight away and then decide on a strategy for the balance.
If you have all of the funds available for the balance you can buy Euros straight away and hold them. You can then send funds to Spain as, and when, required.
If your funds are tied up or you haven’t received money from a UK re-mortgage you can fix an exchange rate for all of your future payments using a forward currency contract. This means that you can buy Euros now but pay for them later (you will need to pay for only 10% of the reserved currency straight away and the 90% balance each time you need to make a Euro transfer).
You can wait and ask your InterchangeFX currency broker to watch the rate for you. It is usually best to decide on the “worst rate” you are prepared to accept and stick to this so that if things go wrong you don’t go below a certain level. You can also establish a target price (which should be realistic and not too “greedy”).
If you are buying in a new development you will have staged payments to make and this makes it even more vital to fix an exchange rate at the outset as your time frame is much longer.
Don’t assume that your bank is the best solution: They are not!
One of the biggest headaches when sending money to Spain is the high receipt fee charged by the Spanish banks. InterchangeFX have worked hard to eliminate this cost and not only send your funds free of charge from the UK but also promise that you won’t be charged a receipt fee in Spain on payments of £5000 and over.
Interchangefx also use the internationally renowned SWIFT payment method that is quick, efficient and secure.
Mortgage Payments: InterchangeFX will fix and exchange rate for up to 2 years ahead; you cannot miss a mortgage payment in Spain so don’t leave it to chance.
Get great currency exchange rates for Spanish property purchases from InterchangeFX.
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