The coronavirus crisis has changed the preferences of many Spaniards and expats living in Spain: some are now choosing to look for a house on the outskirts of big cities, while others are heading to the countryside to have more space and breathe the fresh air. However, the process of selling a main residence to buy another one is not free of complications in Spain with many things to consider, such as the contracting of a new mortgage, the cancellation of the old one, amongst other things.
Along with the experts at Solvia, let's have a look at the main questions involved in a decision like this, with some useful advice on selling and buying property in Spain at the same time:
What is the situation in the property market?
It is important to know the evolution of prices on the property market and also the sales periods corresponding to the neighbourhood of the home you want to sell. It is also recommended to study market forecasts which will indicate the evolution of the value of the properties for the next few months (in case it is convenient to wait and sell later). You can also consider the possibility of including locations that in the process of expansion in your search. Although they many not currently seem very attractive, they offer the opportunity to buy at a good price, allowing you to obtain a greater benefit during the process, as the profits from the sale of the previous property will be higher than the price of the new purchase. Not to mention that, over time, this new home will be revalued because it is located in a developing location.
How can you sell a house if you are still paying a mortgage?
In this case, there are several alternatives. The best thing to do is to sell first, cancel the debt and apply for a new mortgage loan to cover the purchase of the new house. If you have the necessary purchasing power, you also have the option of applying for a new mortgage and taking over both at the same time until the sale is completed. Another possibility is to take out what is known as a "bridge mortgage", a mortgage loan that allows you to move from one property to another without having sold the previous one and without the need for savings. Finally, there is the alternative of negotiating a subrogation with the bank, whereby the mortgage on that property will be in the name of the new owner. Find out more about mortgages in Spain for expats.
If you do not have a previous mortgage, is it best to sell first or wait until you have found your new home?
The ideal is to be able to do everything at once. In other words, finding the right buyer and finding the ideal home to buy, all at the same time. To achieve this, you can try to agree on the final closing of the sale in the deposit contract within a certain period of time. It is recommended to request a period of 4 or 6 months, in this way, you will have the peace of mind of having found a buyer and will have enough time to locate a suitable home and carry out some type of renovation if necessary. If this is not possible and you have enough savings to pay for the new purchase (i.e. 20% of the property price + around 10% for expenses), you can apply for a mortgage loan and, once the sale of the current home has been completed, settle the debt.
How do you plan the sale of the property correctly?
Selling a property requires organisation. This includes factors such as: finding a good intermediary to help and advise you during the process, carrying out possible renovations or repairs that will help to revalue the property, gathering all the information and documentation that may be requested by interested parties (plans of the property, deeds, certificate from the community of owners, energy efficiency certificate, certificate from the Technical Building Inspection (ITE), habitability certificate, last receipt from the IBI (property tax), certificate of outstanding balance of the mortgage or certificate of zero balance, last receipt for supplies...), as well as taking good photographs of the house or correctly valuing the property.
How will the sale of the home affect the IRPF declaration?
As this is a case of reinvestment in the habitual residence, as all or part of the money obtained from the sale of the habitual residence is used to buy a new home, you will be exempt from paying sales tax, as long as the total amount obtained from the transfer is reinvested in the purchase of the new property. If the amount reinvested in the purchase is less than that obtained in the sale, only the proportional part of the profit obtained that corresponds to the amount used for the purchase of the new home will be excluded from taxation.
What other expenses are involved in selling a property to buy another one in Spain?
Apart from the sales tax, there are other expenses that should be taken into account in Spain before starting the process: Municipal Capital Gains Tax (this depends on each local council and is calculated based on the increase in the property's value during the time that you have been its owner), costs of the deed of sale when selling the property, costs derived from the possible settlement of the mortgage in progress, property commission (if applicable), costs resulting from the request for certificates or information regarding the home that you want to sell. With regard to the expenses arising from the purchase of the new home, you must pay the home transfer tax for the purchase, as well as consider the possible need to take out a new mortgage, removal expenses or, if applicable, carrying out work your new home.
To avoid making any mistakes during the process, it is best to consult a property expert who will give you good advice and provide you with sufficient information to settle the sale and purchase successfully. This is especially important in those cases where there is an urgent need to change the property.
- Check out our checklist for buying property in Spain
- Find property for sale in Spain
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