If you are buying a brand new property or ‘off plan’, the developer will generally have the most attractive financing options to offer to purchasers. The paperwork will be standardised but you’ll want to check the terms and conditions carefully.

Check that the contract stipulates the initial payment, the number of the subsequent payments and when these payments will end. From the sum of these payments you’ll be able to see the true cost of the developer’s financing compared to other options. Make sure you know what happens if you should miss a payment. Usually there will be provision for you to make a certain number of late payments and incur only a small penalty. Make sure that you are allowed to pay off the remainder of the contract at any time without incurring the total remaining interest.

Developers generally offer excellent terms to purchasers who begin payment before the building is finished. This can work in your favour but you must be sure that the developer is reliable and solvent, and that he is able to bring the project to completion. The developer must offer a bank guarantee that assures the return of your total investment if the project stalls or fails. It is important that this guarantee does not cost you anything and details of the guarantee must be documented in the contract or a separate document.

Aside from purchase costs (the actual cost of the property) there are other fees involved before the sale is completed.

Taxes

Before a title deed can be registered into a new owner´s name, or a deed issued for a newly constructed building, transfer tax has to be paid by the buyer. It can come in two variants: Transfer Tax (ITP) at 6% , or Value Added Tax (IVA) at 7% plus Stamp duty (AJD) at 0.5% when buying from a developer or promoter. These two taxes are calculated on the declared purchase price on the title deeds.

Also, the local municipalities charge a tax on the increase of the value of the land since the previous sale. It is not based on the seller´s capital gains tax but on a number of caculations and values set by the Town Halls. This tax is called `Plusvalia´, and according to the law it is the seller´s responsibility, although it is commonly stipulated in the contract that the buyer pays it. It is a point which will be negotiated between buyer and seller. On a property worth 25 million pesetas bought ten years ago, a plusvalía amount of 150.000 Ptas. can be expected.

Fees

• Notary Fees: The scale is fixed by law and may range from 30.000 Ptas. for lower priced properties to 140.000 ptas. for higher priced properties.

• Land Registry Fees: The scale is also fixed by law and are between 30% lower than the Notary fees.

• Legal Fees: Normally charged at 1% of the purchase value increased by VAT currently charged for legal services at 16%.

Saving on Costs

Financing from the developer