Buying a property in Madrid is an attractive option for many non-residents, whether as an investment, a second home or to enjoy the city on holiday. Spain, and Madrid in particular, offers a dynamic and accessible property market for foreigners, with legislation that facilitates the purchase of property by non-residents. However, the process does require compliance with a number of specific procedures and requirements to ensure a legal and secure purchase.
The following are the steps and documents required for a non-resident to buy a home in Madrid, as well as other aspects to consider such as taxes and financing.
1. OBTAINING A FOREIGNER’S IDENTIFICATION NUMBER (NIE)
The Foreigner Identification Number (NIE) is a basic requirement for any foreigner, resident or non-resident, to be able to carry out economic operations in Spain, including the purchase of property. The NIE is required to formalise the purchase before a notary and to register the property in the buyer’s name.
How to obtain the NIE
- The NIE can be applied for in Spain at the Oficina de Extranjería (Immigration Office) or at national police stations that have an immigration department.
- It can also be applied for from abroad, through the Spanish consulate in the country of residence.
- The documents required to obtain the NIE include
- Application form (model EX-15).
- Copy of passport or identity card.
- Justification of the reason for the application (in this case, the purchase of a property).
- Payment of the appropriate fee (Form 790).
Obtaining the NIE is one of the first steps in the process, as it is required for any financial or legal transaction in Spain.
2. OPENING A BANK ACCOUNT IN SPAIN
Although it is not a legal requirement, it is highly recommended that you open a *bank account in Spain*, especially to manage payments related to the purchase of the property, such as the mortgage (if applicable), taxes and other expenses associated with the property, such as utilities or community fees.
What documents do I need to open a bank account?
- NIE
- Passport or identity card.
- Proof of source of funds (e.g. employment contract or tax return in country of origin).
- In some cases, a certificate of non-residence, which can be obtained from the offices of the National Police.
3. APPLYING FOR FINANCING
Many non-residents buying property in Madrid choose to finance the purchase with a *mortgage*. Spanish banks offer mortgages to non-residents, although the conditions may be slightly stricter than for residents.
Mortgage conditions for non-residents:
- Percentage of financing: Normally, financial institutions in Spain offer non-residents between 60% and 70% of the appraised value of the property. This means that the buyer must have at least 30% of the value of the property in savings.
- Documentation: To apply for a mortgage, banks require documentation to prove the buyer’s ability to pay, including:
- Proof of income and solvency (payslips, tax returns).
- Credit report from the country of residence.
- Copy of NIE and passport.
- Details of the property to be purchased.
- Term: Mortgage terms for non-residents are usually shorter than for residents, with a maximum of 20 to 25 years.
- Interest rate: This can be fixed, variable or a combination. It is important to compare offers from different financial institutions.
4. CHOOSING THE PROPERTY AND SIGNING THE CONTRACT
Once the buyer has chosen the property they wish to purchase, the next step is to sign a deposit contract, which is a pre-purchase agreement. In this contract, the buyer pays a deposit (usually 10% of the value of the property) as a guarantee that he/she is committed to formalising the purchase.
Contents of the deposit contract:
- Description of the property.
- The agreed price.
- Deadline for signing the title deed.
- Penalties: If the buyer does not complete the purchase, he forfeits the deposit. If the seller defaults, he must return double the deposit.
This contract is important because it allows the property to be reserved and ensures that neither party can back out without penalty.
5. PUBLIC DEED OF SALE AND REGISTRATION OF THE PROPERTY
The public deed of sale is signed before a notary who certifies that the transaction has been carried out legally and with the full consent of both parties. The deed contains all the details of the transaction, such as the identification of the parties, the description of the property and the sale price.
Documents required to sign the deed:
- NIE of the buyer.
- Proof of payment of taxes and related costs.
- The property’s energy certificate, if not already provided by the vendor.
- Habitability certificate, if applicable.
Once the deed has been signed, the Notary will send the documents to the Land Registry, where the property will be registered in the name of the new owner.
6. PAYMENT OF TAXES AND RELATED COSTS
The non-resident buyer must bear in mind that the purchase of a property in Madrid involves a series of taxes and charges that must be paid once the deed has been signed.
- Taxes to be paid:
- Property transfer tax (Impuesto de Transmisiones Patrimoniales, ITP): This applies to the purchase of second-hand properties. In the Community of Madrid the ITP is 6% or 7% of the value of the property, depending on the price of the property.
- VAT (Value Added Tax): If the property is a new construction, the buyer must pay VAT, which is 10% of the purchase price.
- Actos Jurídicos Documentados (AJD): This tax is also applied to new properties and is 1% of the mortgage or deed value, depending on the Autonomous Community.
- Associated costs:
- Notary: The notary’s fees usually depend on the value of the property.
- Land Registry: The fees for registering the property in the name of the new owner.
- Valuation: If you are applying for a mortgage, the bank will require an official valuation of the property.
- Advice: If the buyer decides to delegate some of the formalities (such as paying taxes), it is usual to hire a lawyer.
7. LEGAL CONSIDERATIONS: ADVICE AND REPRESENTATION
In order to avoid any complications or risks during the purchase process, it is advisable for non-resident buyers to hire a lawyer specialised in property law in Spain. This lawyer will be able to advise on legal aspects, check contracts and represent the buyer in the event that the buyer is unable to be present in Spain throughout the process.
The buyer can also give their lawyer or representative a power of attorney to carry out all the formalities on their behalf, including signing the title deeds and paying the taxes.
8. MANAGING THE PROPERTY AFTER PURCHASE
Once the property has been purchased, the non-resident buyer will have to manage the utilities (water, electricity, gas) and the community fees if the property is part of a community. It is advisable for the buyer to set up a direct debit for these payments to their account in Spain to avoid any delays or cuts in service.
CONCLUSION
Buying a home in Madrid as a non-resident is an accessible process, but it does involve a number of specific procedures and requirements, such as obtaining an NIE, opening a bank account and complying with tax regulations. With proper planning and the help of professionals such as notaries and lawyers, non-residents can complete their home purchase safely and efficiently. It is also important to consider the additional costs and taxes to be paid in order to avoid surprises and ensure a successful transaction.
All procedures for buying a property in Madrid are personally managed by Quikprokuo, ensuring a safe and secure purchase for our clients. Contact us and we will advise you and take care of the whole process.
