LEGAL ADVICES

1. Are you thinking of purchasing a property in Spain?
2. What is a mortgage?
3. What amount can I apply for?
4. What are interest rates?
5. How much are my monthly repayments?
6. Additional expenses for the purchaser.
7. General expenses.
8. Taxes.
9. Documents necessary for signing the mortgage.
10. Insurance protection.
11. We can be of real help to you.
12. You can count on us.

1- Are you thinking of purchasing a property in Spain?

If you are thinking of purchasing a property in Spain, it is very important to choose the right financial entity to help you with the financing.

Whether you want to buy your main residence or a retirement or holiday home, CAJAMAR can be of great help to you.

CAJAMAR offers you its great experience, with more than 700 offices around Spain and strategically located along the Mediterranean coast.

The leaflet is intended to clear your main doubts on purchasing real state, as buying a house is one of the most important economic decisions of your life.

Spanish laws on mortgages and consumer protection are amongst the most advanced in Europe.

Our main is to offer you financing to measure that adapts to your family economy within the great variety of mortgage products available.

2- What is a mortgage?

A mortgage is a credit guaranteed by you and by your property. You therefore obtain more advantages than in other credits with fewer guarantees.

- You will pay lower interest.
- Lower commissions.
- You are given a longer time to return the loan.

** The size of the mortgages means that they might last a long time as long as the person receiving the credit is under 65.

3. What amount can I apply for?

In order to determine the size of the mortgage that adapts to your needs, we must consider two main points:

- Firstly, the value of the property. A surveyor authorised by the Bank of Spain will inspect and value the building to determine its market value.

As a general rule, the amount of a loan will be 70-80% of the survey value.

- The second factor that should be considered in determining the amount of your mortgage is your income. Normally, it is recommended that the monthly repayment of your mortgage should not exceed 35% of your income.

4. What are interest rates?

- Fixed interest rate:

The advantage of a mortgage with a fixed interest rate is that it is not affected by market fluctuations. You will be sure that your monthly payments will not be increased if interest rates rises, but the drawback is that you will not benefit from the falls.

In this type of loan, the return period is usually shorter than with variable rates (approximately 12 years), and commission for advance repayment is higher.

- Variable interest rate:

This kind of mortgage enables you to benefit from the falls in interest rates, but it will also be affected by any increase. The main advantage lies in the transparency of the market situation with interest rates being adjusted annually.

Another important characteristic of this type of mortgage is its length, which can be as much as 30 years.

5. How much are my monthly repayments?

The monthly payments depend on three factors: the amount of the loan, the interest-rate and the duration of the mortgage. The following table shows the amount of the monthly payments for a mortgage of 10,000 Euros, according to the different periods and interest rates.

Interest-rate	10 Years	15 Years	20 Years	25 Years	30 Years
3,0 %	96,56	69,06	55,46	47,42	42,16
3,5 %	98,98	71,49	58	50,06	44,9
4,0 %	101,25	73,97	60,6	52,78	47,74
4,5 %	103,64	76,5	63,26	55,58	50,67
5,0 %	106,07	79,08	66	58,46	53,68
5,5 %	108,53	81,71	68,79	61,41	56,78
6,0 %	111,02	84,39	71,64	64,43	59,96
6,5 %	113,55	87,11	74,56	67,52	63,21
7,0 %	116,11	89,88	77,53	70,68	66,53
7,5 %	118,7	92,07	80,56	73,9	69,92

As you can see, a longer period means lower payments. However, do not make the mistake of extending the payment period unnecessarily.

How can I use this table?

Very easy. Choose the interest-rate you have been offered in the first column and find your monthly payment under the number of years for repaying your loan.

You have obtained the monthly repayment for a loan of 10,000 Euros. If you wish to ask for a loan of 80.000 Euros, just multiply the amount you have obtained by 8 to get the monthly repayment of your mortgage.

Notice the different combinations to adequately adapt the repayments to your monthly income.

6- Additional Expenses for the Purchaser

When making your calculations, you must remember the complementary expenses of these operations, which will amount to approximately 10 % of the value of the purchase.

These expenses will be the following:

7- General expenses

- Surveyor cost:

The cost will depend on the market value at which your dwelling has been surveyed, and the survey can only be done by a surveyor company authorised by the Bank of Spain.

-Land Register check:

A verification in the land register that the dwelling you are going to buy is not encumbered in any way.

The costs of surveying and checking in the land register are necessary to be able to start to proceed with the mortgage, and must be paid by the customer even if the opertation is not formlised.

- Notary public expenses:

These included professional fees for certifying that the purchase and sale Deeds and mortgage have been carried out in accordance with what is agreed and Spanish law. The amount of these fees will vary mainly alongside the value of the property. The fees of Spanish notary publics are controlled by the Notary Public Association.

- Property Register:

By registering your Deed with the property register, you become the only legal owner of the purchased property. The fees are published in the Property Register.

- Solicitors:

Solicitor expenses for dealing with the administrative procedures such as the payment of interests, registration…

8- Taxes

- Transfer Tax:

If you buy a second-hand property, you must pay the so-called transfer tax, which, depending on the autonomous community, will be 6% or 7% of the purchase price.

- VAT:

When you buy a new property, you must pay 7% VAT on the purchase price. If you buy a garage along with the property, the VAT applicable will remain at 7%.

However, as a general rule, the VAT to be paid on lands, commercial premises and garages amounts to 16%.

- TDJA:

Tax on Documented Juridical Acts, which encumbers the public Deed in the event of buying a new property and the formalisation of the mortgage before a notary public.

The applied rate is generally 0.5% in the event of the purchase and 1% for the mortgage, although this can vary depending on the autonomous community.

- Municipal Capital Gains Tax

A municipal tax that encompassed the increase in the value of the real estate since it was last transmitted. Its amount will depend on the cadastre value, on the area where it is located, and on the years since the last purchase operation.

9- Documents necessary for singing the mortgage

The documents to be presented are divided into two groups:

Personal information: Identify Document and Fiscal Identification Number in Spain (N.I.E.). If the applicant is married, it will be necessary to prove the economic regimen marriage agreement.

Financial information: It is necessary for the financial entity to obtain an image of the income. We can therefore ask for the following documents:

- If employed.
- The last three payslips
- The last Tax Assesment.
- A Bankers Reference with the telephone number, the name of the manager and your account number.
- Account statements of the last three months.
- A list of all your capital wealth and credits.
- A reference from your employer on the duration of your labour contract and your salary, etc.
- If you are self-employed. 
- Your profit and loss account (signed by a registered legal adviser).
- A copy of your last Tax Assesment.
- A reference from your bank with the telephone number and fax number, the name of the manager and your account number.
- Account statements of the last three months.
- A list of your whole capital wealth and credits.

10- Insurance Protection

- Compact house insurance

Cajamar household insurance covers anything that might happen. Your house and your belongings will always benefit from maximum protection. Great advantages in your benefit.

- You will have an emergency service at your disposal 24 hours a day.
- Annual revaluation of the assured capital.

- Cajamar TAP LIFE INSURANCE

CAJAMAR TAP life insurance covers the payment of the pending debt in the event of the death or permanent incapacity of the beneficiary of the mortgage.

Your family and inheritors will thus be relieved of this debt, and will also receive what is left over if this should happen.

11- We can be of real help to you

We hope that this information has been useful for you as a guide of choosing your mortgage and that it has given you new information for seeking your property in Spain.

HOW TO AVOID PROBLEMS WHEN LETTING OR RENTING PREMISES

“When drafting a contract it is very advisable to keep in mind that either of the parties may not fulfil his duties deriving from it. If one could be certain that each party will meet their obligations there would not be no need to write and sign a contract at all.”

    Spanish Law relating to urban rental agreement distinguishes between two main different kinds of rental agreements: Long-term contracts for residential properties (Arrendamiento de Viviendas), and all the rest. Logically there are a large number of different kinds of rental agreements included in the latter. These include everything from short-term agreements for properties to be used for personal purposes to the rentals contracts for premises and offices. The Arrendamiento de Viviendas is basically submitted to the regulation of the law. The other group, however, is mostly left to private to private agreements between the tenant and the landlord, with basic rules set out by legislation. The explanation for this seems to be simple: legislators are trying to safeguard tenants´ rights for long-term agreements and are offering the possibility to freely negotiate the conditions of the contracts for offices and premises. Furthermore, the law clearly expresses that the circumstances regarding these contracts shall be, in the first instance, ruled by the internal agreements between the parties. If circumstances arise that had no been foreseen in the private rental contract they will be subject to this law or but subject also to Spanish Civil Code.

   The law for urban rental agreements is applicable to those contracts that started after 1995. All agreements signed before that date will still be ruled by the previous law of 1964 and its modifications and extensions like the Royal Decree of 1985, for example, with the modifications incorporated in the transitory dispositions of the new one means that in these contracts rental periods, rents and conditions can be freely agreed upon providing that they do not contradict the law, morality and/or public interest. Therefore, people can agree on the rental of premises for a month, a year, two years, on renewals etc. Likewise the rent can be increased either by the application of the I.P.C. (Spanish Consumer Price Index) or whatever percentage the parties may have agreed. These matters seem to be clear, easy to understand and to apply. Problems arise when the contracts are not properly drafted, in some occasions, litigation occurs due to the absence of clear stipulations or no stipulations regarding some important matters. There are far too many court claims relating to matters such as possibilities of extending the contract for a new period if this has not been included in the agreement and the landlord does seem to be prepared to grant an extension.

    Mainly these problems are created due to lack of knowledge and experience either from the tenant, the landlord, or both. In some occasions contracts are based on good faith between parties due to the fact that they both feel that they are fair people who will act according to what they agreed and thus feel that there is no possible problem in the future. In others cases, problems occur because the parties want to save expenses for legal advice on the wording of the contracts. The majority of problem cases arise because the contract does not really reflect the intentions of the parties thereto.

    When drafting a contract it is very advisable to keep in mind that either of the parties may not fulfil his duties deriving from it. If one could be certain that each party will meet their obligations there would be no need to write and sing a contract at all. We have to look at situations where one-or all- parties do not adhere to what they have committed to and the problems deriving thereof.

    It is very important to seek legal advice, in order to make sure that all interests are protected. In this kind of letting agreement details are to be considered very important. We are not speaking of a scenario where each party is fulfilling their obligations but of those in which either, or all, of the parties are trying to take advantage of a situation. There are many examples of mistakes that have been made in rental agreements. Some of them even appear to be anecdotal but many of them have created big problems for the landlord and/or the tenant. There are cases, for example, in which one stipulation stated that the rental agreement was for a period of one year but the rent had been fixed on a monthly basis and the court considered that the rental agreement was for a month and not a year. In another instance it was stipulated that the premises was being rented by three partners; and, the fact that one of them left led to an automatic resolution of the contract. In another case a specific activity had been stated as a purpose for the rental and the addition of a new one triggered the cancellation of the contract.

     We all have a feeling when signing contracts that all parties will fulfil the agreement but often we make the mistake in taking for granted that all will fulfil the interpretation of the agreement and we do not even consider that the other party may have an entirely different interpretation. That is why is it so important to have clear wording in the contract that will not leave any room for misinterpretations or faulty presumptions.

    Rental contracts, other then long-term rental contracts for private residence, are mainly left to “Autonomía de la Voluntad” which is translated to mean “the parties´freedom to contract.” It is, therefore, quite important to pay attention to matters such as possible extensions of the agreed period, permissions to sublet or cede the contract, permission to carry out reforms on the premises, etc. This will most certainly contribute to the avoidance of many kinds of misunderstanding, conflicts between the parties and possible court claims.