One of the key expenses you’ll encounter in buying your affordable home, car or sailboat in Mallorca is the cost of financing. You earned this house or whatever it is you buy. And you earned the money others may make while making it your own. So how do you best manage the results? It can be a little complicated, but it’s not that hard.
First, and quickly, do a little preparation. Get a NIE number. As an overseas purchaser, you’ll have to have one for the transaction (and for cars and other things you might need to buy). Next, get a copy of your ID (typically your passport) certified by a notary for use in the legal documents.
Will you use a mortgage to buy the property? Add to the selling price about 10% for typical taxes and legal fees to determine how much of the total you may need to finance. Talk to several banks. Expect each to look at risk in terms of your ability to pay as well as whether the property you intend to buy can be legally sold or mortgaged. If both pass muster, the bank will usually loan up to 60% of the property’s value or selling price, whichever is lower, so you’ll need enough cash to cover the rest.
Even if you're not looking for a mortgage, make note that, while cash sales are on the rise, sometimes a mortgage allows you to keep more money in higher yielding investments or reduces inheritance or other taxes, offsetting a (low) interest rate.
Innovating with a new breed of digital currencies and blockchain protections that may eliminate some of the conventional fee-based transactions?
Whatever you decide, secure the home of your affordable dream promptly, with an option contract and the required deposit (usually 10%). Push the closing date out far enough to do some serious homework but not so far out that the instability in currency markets smashes your dreams. Work in good faith with the seller to build a relationship that may yield a bit of creative cooperation. That said, bring an attorney into the new relationship. She or he will work hard on your behalf to meet the seller’s needs and to represent your best interests. That’s important because a seller can choose to pull out of the deal and your deposit may not be refundable. You need the lawyer to search the title ("Escritura") and other documentation for financing or a sound transaction.
When thinking about money, don’t forget the cash you might save outside the usual interest rates and currency fees.
Perhaps improvements can be made by the seller for a slight increase in the sales price, which you can amortize over the life of a mortgage for as little pain as possible up front. Or consider taking a few updates off the table, to lower your cash out percentage and leave room for a few memorable trips to explore the far reaches of your new island home.
Know who’s getting what for each piece of the transaction and look for every opportunity to avoid needless expense. Tune in to Affordable Mallorca often to get the latest property news and tips – laws change!
Invest time in yourselves and your future as well as the home that has captured your heart.
And don’t rule out that sailboat!
Maybe your affordable lifestyle has more breathing room than you’ve imagined!