Buying Property in Mallorca: A Comprehensive Step-by-Step Guide 2025
Purchasing property in Mallorca can be an exciting yet complex process, especially for non-residents. This guide aims to provide a detailed roadmap to help you navigate the intricacies of buying property in this beautiful Spanish island.
1. Understand Your Budget
- Total Budget: When calculating your budget, consider not only the purchase price of the property but also additional costs such as taxes, notary fees, legal fees, and potential renovation costs. These can significantly add to the overall expenditure. For instance, taxes can range from 8% to 10% of the property's value, while notary and legal fees might add another 2-3%. If you're planning renovations, it's wise to allocate an additional 10-20% of the property's price for unforeseen expenses.
- Mortgage Options: If you plan to finance your property with a mortgage, Spanish banks typically offer loans up to 70% for non-residents. It's crucial to explore the best mortgage deals and ensure you meet the eligibility criteria. Consulting with a financial advisor can help you understand your options and secure the best possible terms. Additionally, consider the interest rates and repayment terms, as these will affect your monthly budget. Some banks may offer more favourable terms if you open a bank account with them or use their other financial services.
2. Legal Considerations
- Property Ownership for Non-Residents: Non-EU citizens can buy property in Mallorca but must apply for a NIE (Número de Identificación de Extranjero), a tax identification number required for all property transactions. The NIE is essential for opening a bank account, signing the deed of sale, and paying taxes. The application process can be done through the Spanish embassy or consulate in your home country or directly in Spain, and it typically takes a few weeks.
- Check the Title Deeds: Ensure the property you are interested in has clear title deeds. This confirmation is essential to verify that the seller is the rightful owner and that there are no debts or legal issues attached to the property. You can request a Nota Simple from the Spanish Land Registry, which provides a summary of the property's legal status. It's advisable to have your lawyer review this document to ensure there are no hidden problems.
3. Hire a Legal Professional
Property Lawyer (Abogado): It is highly recommended to hire a lawyer who specialises in Spanish property law. They will assist with:
- Checking all property documents and contracts.
- Ensuring that there are no encumbrances or legal issues with the property.
- Everything throughout the transaction process.
- Verifying the correct registration of the property with the Land Registry.
A good lawyer can save you from potential legal pitfalls and ensure that your interests are protected throughout the process. They can also help you understand the local laws and regulations that might affect your purchase.
Notary: Spanish law requires that the sale of property is signed in front of a notary. Your lawyer will typically help coordinate this, ensuring all legal requirements are met. The notary's role is to verify the identities of the parties involved, ensure that the contract is legally binding, and register the sale with the Land Registry.
Apartment with sea views in the privileged La Calatrava district of Palma - View Apartment
4. Making an Offer and Negotiation
- Reservation Agreement: Once you’ve found the property you like, you can sign a reservation agreement and pay a small deposit (usually 1% of the value). This secures the property while you complete due diligence. This step is crucial as it prevents the seller from accepting other offers while you conduct your inspections and finalise your financing.
- Negotiation: You can try negotiating the price, especially if the property has been on the market for some time or if there are other offers. A skilled negotiator can help you secure a better deal. Factors such as the property's condition, market trends, and the seller's motivation can all play a role in negotiation.
- Pre-Contract: If everything checks out, you can sign a preliminary sales agreement (Contrato de Arras), which binds you and the seller to the deal, with a deposit of around 10% of the purchase price. This contract outlines the terms of the sale and the timeline for the final transaction.
5. Tax and Fees
When purchasing property in Mallorca, you will encounter several additional costs:
- Property Transfer Tax (Impuesto de Transmisiones Patrimoniales): This is the main tax for second-hand properties. The rate is generally between 8% and 10% depending on the value of the property. This tax is paid at the time of purchase and is based on the property's declared value.
- VAT (IVA): For new properties, VAT is 10% on the purchase price, along with a 1.5% stamp duty (Actos Jurídicos Documentados). New properties are those that have never been sold before, such as those sold directly by developers.
- Notary and Registration Fees: Fees for the notary’s services and registering the property can vary, but they typically cost around 1-2% of the property price. These fees cover the legal formalities of the sale and the registration of the property in your name.
- Lawyer’s Fees: Legal fees can range from 1% to 1.5% of the purchase price. These fees are for the services provided by your lawyer, including due diligence, contract review, and assistance with the transaction process.
6. The Purchase Process
- Final Contract: Once due diligence is complete, the final contract (Escritura Pública) is signed in front of a notary. At this point, the remaining purchase amount is paid, and the property is officially transferred to your name. This is a critical step as it legally transfers ownership of the property to you.
- Register the Property: After signing the final contract, the notary will file the deed with the local Land Registry. This officially confirms you as the new owner of the property. Registering the property is essential for protecting your ownership rights and ensuring that the property is legally recognised as yours.
7. Property Maintenance and Utilities
- Utility Connections: Be sure to set up water, electricity, and internet connections. These can often be transferred under your name once you are the owner. Contact the local utility companies to arrange for the transfer of services, and ensure that all bills are paid up to date.
- Residency: If you plan to stay in Mallorca for more than 90 days, you will need to apply for residency. The regulations vary depending on whether you're an EU or non-EU citizen. EU citizens can apply for a residence certificate, while non-EU citizens may need to apply for a residence visa.
- Tax Implications: Be aware of the tax regulations in Spain, especially if you become a tax resident or rent out your property. Spain has a progressive tax system, and you may be subject to income tax on rental income or capital gains tax if you sell the property.
By following these steps, you can navigate the property buying process in Mallorca with confidence, ensuring a smooth and successful transaction.
By Iris Gruenewald
Founder
