Top 3 Differences to Consider When Buying Property in the UK vs Spain

Buying property abroad is an exciting prospect, but it comes with challenges that vary greatly depending on the country. The UK and Spain are two popular destinations for property buyers, yet the process, costs, and legal frameworks differ significantly. Understanding these differences can save you time, money, and stress. This post highlights the top three differences between buying property in the UK and Spain, along with practical tips on what to watch out for.

Typical British terraced house with brick facade

1. Legal Process and Ownership Structure

One of the biggest differences lies in how property ownership and transactions are handled.

UK Property Buying Process

In the UK, the process is quite structured and involves several key steps:

• Offer and Acceptance: After finding a property, buyers make an offer. Once accepted, the property is taken off the market.

• Conveyancing: Solicitors handle the legal work, including title searches and contract preparation.

• Exchange of Contracts: This is a critical stage where the buyer and seller legally commit to the sale. A deposit (usually 10%) is paid.

• Completion: The remaining balance is paid, and ownership transfers.

  
  

Ownership in the UK is typically freehold (full ownership) or leasehold (ownership for a fixed period). Freehold is more common for houses, while flats often come with leasehold agreements.

Spanish Property Buying Process

Spain’s process differs in several ways:

• Reservation Agreement: Buyers often pay a small deposit to reserve the property.

• Private Purchase Contract: This contract requires a larger deposit (usually 10-30%) and outlines the terms.

• Due Diligence: It is essential to check the property’s legal status, debts, and planning permissions. This is done by a lawyer.

• Public Deed of Sale: The final contract is signed before a notary, and the buyer pays the remaining balance.

• Land Registry: The property must be registered in the buyer’s name.

  
  

Spanish properties are usually sold with full ownership rights, but it is crucial to confirm there are no outstanding debts or legal issues.

What to Look Out For

• In the UK, exchange of contracts is the point of no return. Be sure all inspections and finances are in order before this step.

• In Spain, the due diligence phase is critical. Hire a reputable lawyer to avoid hidden debts or planning problems.

• Understand the difference between freehold and leasehold in the UK, as leasehold properties may have additional fees and restrictions.

  
  

2. Costs and Taxes

The financial side of buying property varies widely between the two countries.

UK Costs

• Stamp Duty Land Tax (SDLT): This tax applies on properties above a certain price threshold. For example, properties over £250,000 incur rates starting at 2%, increasing with price.

• Legal Fees: Conveyancing fees typically range from £800 to £1,500.

• Survey Costs: Surveys to assess property condition can cost between £400 and £1,000.

• Other Fees: Mortgage arrangement fees, valuation fees, and removal costs.

  
  

Spanish Costs

• Transfer Tax (Impuesto de Transmisiones Patrimoniales): This varies by region but generally ranges from 6% to 10% of the purchase price.

• Notary and Land Registry Fees: Usually around 1% to 2%.

• Legal Fees: Lawyer fees typically run between 1% and 2% of the purchase price.

• VAT (IVA): New properties attract VAT at 10%, plus a stamp duty of around 1.5%.

  
  

What to Look Out For

• In the UK, stamp duty can add a significant amount to your budget, especially for higher-priced homes.

• In Spain, regional variations in transfer tax mean you should check the exact rate for the property’s location.

• Factor in all additional fees when budgeting, not just the purchase price.

• Currency exchange rates can affect the final cost when buying in Spain, so consider timing your transfer carefully.

  
  

Spanish coastal villa with swimming pool and sea view

3. Financing and Mortgages

How you finance your property purchase differs between the UK and Spain.

Mortgages in the UK

• Mortgages are widely available to residents and non-residents.

• Loan-to-value (LTV) ratios typically reach up to 75-90% depending on the buyer’s profile.

• Interest rates vary but are generally competitive.

• The process involves credit checks, income verification, and property valuation.

  
  

Mortgages in Spain

• Spanish banks offer mortgages to foreigners, but conditions are stricter.

• LTV ratios are usually lower, around 60-70% for non-residents.

• Interest rates may be higher, and fixed-rate mortgages are less common.

• The application process can take longer and requires more documentation.

  
  

What to Look Out For

• In the UK, shop around for mortgage deals and get a mortgage agreement in principle before making an offer.

• In Spain, be prepared for a longer approval process and consider using a mortgage broker familiar with foreign buyers.

• Understand the currency risk if your income is in pounds but your mortgage is in euros.

• Always check the total cost of the mortgage, including fees and early repayment penalties.

  
  

Mortgage advisor discussing paperwork with client