Rent or buy in Spain?

You have just arrived in Spain and you have found your little paradise! So you are a future buyer or renter of real estate in Spain? What are the advantages and disadvantages of buying or renting real estate? All the answers are in the article that follows. Rent or buy is a lifestyle choice and it is up to you to decide based on your personal situation, your tastes and your ability and your economic factors.

RENT OR BUY? ADVANTAGES…

The general advantages of renting

• Access to a better location, a larger and better equipped property.

• Minimal and fast administrative procedures: no application for a mortgage, no passage by the notary, and no registration of ownership.

• Simplified decision-making.

• If you make a mistake, it is less problematic.

• You can change your home and your location more easily.

• You do not waste time in HOA (Home Ownership Association) meetings.

• Better for the short term.

The economic benefits of renting

• No need for significant savings.

• No mortgage, registration or VAT fees.

• You avoid a long-term financial commitment with a credit institution.

• You cannot bear the financial risk of uncertain business conditions.

• Maintenance or reform of housing and common premises is generally the responsibility of the owner or co-owners.

• Rents are sometimes ridiculous in Spain, especially in southern cities.

• Apartment sharing (very popular in Spain) reduces the overall expenses.

• There are other innovative and economical rental options, egg coiling for young single entrepreneurs

The general benefits of buying

• Owning offers more security and stability (“feel at home”).

• You can do all the work you want within the walls.

• You can leave the house empty, live there, leave it with your family or friends, or rent it.

• No pressure from an owner to whom you must be accountable.

• You decorate and furnish your home to your taste.

• The tax benefits of owning.

The economic benefits of buying

• You have a legacy that you can pass on.

• The value of the property increases each year.

• The monthly mortgage can be equivalent or lower than the cost of rent.

• With a fixed rate loan, you know what you will pay over a long period of time.

• Reforms and other arrangements increase the value of the property.

• The purchase can benefit from tax benefits.

•  Good purchase prices are still available in Spain.

• Interest rates are at historically low levels, and anticipated to stay low for the foreseeable future.

• In some large Spanish cities, a loan costs less than rent.

• For some atypical profiles that do not please the lessors (fixed-term, temporary, entrepreneur…), it is sometimes easier to buy than to rent.

• If you have a large budget, you can find for purchase what cannot be found for rent.

RENT OR BUY? THE INCONVENIENTS…

The general disadvantages of renting

• Tenure in the dwelling depends on the renovation of the contract or the desire of the owner.

• The landlord may prevent you from doing work or reforms even if you take care of them.

• You have a lease relationship with the owner and they can potentially increase the rent. 

• You depend on the requirements of the owner and the rules of the association.

• The owner may not renew the lease.

The economic disadvantages of renting

• Installation costs are important in Spain (1 month in advance + 2 or 3 months deposit + 10% of the yearly lease to the real estate agency).

• If you make any improvements, the investment is lost.

• Investment (rent, reforms) pay nothing and you do not save.

• Raising the rent or renegotiating the lease can be important.

• There is a financial penalty if you leave the house before the end of the contract.

• The rental price can vary each year according to the price index.

The general disadvantages of buying

• The decision is much more complex.

• The withdrawal period does not exist in Spain, unless you have a contingency in the contract, you could lose your deposit.  

• The prospective owner is responsible for all administrative and legal controls prior to purchase.

• There are many paperwork and administrative steps with the agency, the bank, the notary, the lawyer or the council, etc.

• Most often, improvements need to be done.

• There is always something to repair.

• Once a property is bought, it can be difficult to change the city or the country.

The economic disadvantages of buying

• There is a very large initial personal financial contribution (count 25 to 50% of the value of the property depending on whether or not there is work, and depending on the loan granted by the bank).

• In Spain, it is important to be assisted by a lawyer or a real estate advisor (the Spanish notary is a simple a registration process), which entails additional costs.

• Very few foreign banks accept a loan for an acquisition in Spain.

• All transactions have high fees: 10% VAT if the property is new or heritage transmission tax if the property is older of 4% to 11% depending on the region, and in a mortgage, file opening costs, registration and notarial fees.

• In the first few years, paying the mortgage covers practically only the interest and you owe the bank about the same amount as the borrowed value.

• You must pay the management and maintenance fees of the condominium.

• You must pay property tax (IBI).

• It is safer to take out life insurance (which can become overpriced after age 55).

• If you buy a floating rate, if interest rates go down, your monthly payments will go down, but if the rates go up then you risk having an unpleasant surprise (prefer fixed rate loans even if they were higher initially) .

• If your income is down and you cannot pay your credit, you risk losing your property at a low price.

Rent or buy? You chose?

As you start the process of buying or renting a home in Spain, you should always have a Real Estate Advisor, who will have your best interest in mind.  Here is an article that will spell out how we can help you search for your home in Spain.  

Find your Real Estate Advisor

Real Estate Advisor, at Your Service

With more than 20 years of experience in real estate acquisition procedures in Spain, we are at your disposal to assist you with all the necessary steps from the search for a property to services offered after the acquisition. Organizing the visits of properties, the legal verification of the properties, the obtaining of a mortgage, the administrative procedures and the signature of the different notarized documents.

Do not hesitate to contact us!

Send an email to spainpurchase@yahoo.com).

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