Got A Gran Canaria Mortgage? Your Bank Probably Owes You Thousands

Spains banks owe many Gran Canaria customers thousands of euros

Spains banks owe many Gran Canaria customers thousands of euros

The last decade was torrid for Spain’s banks. They overlent and overspent during the property boom and suffered during the subsequent crash. Many went bust or merged. Read More


The Guru Guide To Gran Canaria Currency Exchange

The Guru Guide to fast, safe and reliable Gran Canaria currency exchange

Fast, safe and reliable Gran Canaria currency exchange

Here’s our Gran Canaria currency exchange guide with everything you need to know about …

How to get the most out of your holiday money.

How to transfer money to and from Gran Canaria and get the best possible exchange rates.

Read More


The Guru Guide To Renting Out Your Gran Canaria Property

Renting out Gran Canaria property

Renting out Gran Canaria property

There are three ways of renting out Gran Canaria property;

Short-term tourist rentals

This is perfectly legal if your property is on land classified as residential (everywhere except the tourist resorts). In resort areas, it is more complicated as you have to have a tourist license or rent it out via a central management company.

Until recently you needed a Tourist Rental License to do this and only certain properties were eligible (rural houses, villas, etc). However, the law has now changed and any residential property can now be rented to tourists on a short-term basis (anything under three months).

You do not need the permission of the Comunidad to rent out  a private apartment (although a Comunidad can vote to ban all touristic rentals in a building or complex) and you don’t need a plaque or license. All you have to do is pay tax on the income you receive and advertise it honestlyRates vary depending on location on

Rates vary depending on location and property specifications. Cleaning costs are often added as a one-off extra charge for tenants.

NOTE: Please speak to a quality estate agent before buying a rental investment property in Gran Canaria’s resorts. The law for resort properties is currently in flux and you need expert advice.

Long-term residential rentals

Renting out property in Gran Canaria is fairly easy. You can either do it privately by advertising in the local papers or on websites like Segundamano and FotoCasa, or by advertising it via an estate agent. Agencies traditionally charge the tenant one month’s rent, but some are now asking the property owner to pay this fee, or to split it with their new tenant.

Most owners ask for a month’s rent as a deposit and return it once the tenant has left, minus any costs for repairs (reasonable wear and tear cannot by law be deducted from the deposit).

One advantage of renting via an agent is that they handle the contract, but you can download example contracts.

If you are a non-resident, some agencies will manage your property (they arrange for plumbers if there’s a problem, etc) for a monthly fee of around €50.

Renting out Gran Canaria property the middle way

Many owners take a middle road between touristic rentals and residential lets by renting their property to people who spend several months a year living in Gran Canaria. They are often retired Brits and Scandinavians escaping the winter back home (known as snowbirds) but digital nomads are also flocking to Gran Canaria.

The benefits of renting to snowbirds are that you can charge more per month than for a residential let and don’t have to handle frequent keys and cleaning.

To advertise your property to snowbirds, post it on websites like AirBnB and specify a long minimum stay.

Renting and taxes

Non-resident property owners pay 24% income tax on rental income of all types while residents have to pay income tax. Residents pay income tax.

Most non-residents use a local Gestoria to handle their tax and paperwork.


The Guru Guide To Property taxes in Gran Canaria

Gran Canaria property tax guide

Gran Canaria property tax guide

Buying a property in Gran Canaria costs about 10% of the price you pay once you factor in taxes and fees. Selling a property involves some costs but these only add up if you profit from the sale. The annual tax burden of owning a property in Gran Canaria is low.

Annual property taxes in Gran Canaria

IBI

An annual property tax set by the local Ayuntamiento that is between 0.5% and 1% of the official value of your property (much lower than the market value). The IBI rate in Las Palmas is currently 0.73%.

Other ongoing costs

IBI is the only monthly tax cost that you have to pay in Gran Canaria (there is no council tax). However, if you live in a building or a complex you have to pay a monthly communidad fee which is your share of costs like communal electricity, lift and pool maintenance and insurance.

The amount varies depending on the building and the facilities and services it offers.

Gran Canaria property taxes at  purchase

 

ITP or re-sale purchase tax

Buyers of re-sale property (as opposed to a new build) are required to pay the Impuesto de Transferencia de Propiedad which is 6.5% of the price paid for the property.

New Properties purchase tax

This is currently 7% if the house is finished or is being built at the time of the purchase. It is paid by the buyer.

A property buyer only ever has to pay one of the above two taxes.

Other fees

While not strictly taxes you also have to pay Notary fees (around 300 euros for most properties, more if you buy with a mortgage) and Property Registry fees (around 300 euros). Most buyers use a Gestoria to handle the paperwork associated with a purchase (they charge around 250 euros).

Along with the  10% taxes and fees, you’ll need a minimum  deposit of 20% if you get a mortgage (30% for non-residents) and 300 euros to pay for a valuation of the property you want to buy. Spanish banks also insist that you take out life insurance and property insurance at the same time as the mortgage.

Gran Canaria property taxes at sale

 

Plusvalía municipal 

Paid by the seller to the Ayuntamiento where the property is located, this is also called the impuesto sobre el incremento de valor de los terrenos de naturaleza urbana (IIVTNU).

You pay plusvalia on the increase in value of the land that a property occupies during the period that you own it (capped at 20 years) and the amount varies depending on the period of ownership and the rates set by the Ayuntamiento.

Incremento patrimonial 

Capital gains tax paid to the Spanish Treasury; Based on the difference between the sale price and the price paid by seller when he/she originally purchased the property (you can offset costs of improvements so keep your new kitchen and bathroom facturas).

As of 2016, the capital gains tax rate in Gran Canaria is 19% for the first 6.000 Euros, 21% from 6.000 to 50.000 Euros and 23% from that last amount upwards.

However, one advantage of the fall in Gran Canaria property prices over the last 10 years is that few sellers have to pay capital gains tax.

Tax exemption

Avoid paying capital gains tax by reinvesting the money from the sale of a main residence property  into another main residence property within two years. EU nationals, even non-residents, can also avoid this tax if they buy a new main residence property anywhere in the EU within two years.

To claim the exemption you need to be able to prove that a property has been your main residence. A good reason to get a ‘certificado de empadronamiento’ certificate from your Ayuntamiento as soon as you buy your house.

Mortgage cancellation fees

If you cancel a mortgage when you sell a property, expect to pay 1% or more of the outstanding balance for the privilege, plus up to 1000 euros to register the cancellation at the Notary and Property Registry. The fine for abusing a bank manager is significantly higher.

This Guru Guide written by Laura Leyshon, our favourite Las Palmas estate agent.


The Guru Guide To Getting A Gran Canaria Mortgage

Getting a Gran Canaria mortgage

Getting a Gran Canaria mortgage

The process of getting a Gran Canaria mortgage can be long and Spanish banks have become cautious since the crisis.

However, after several years of shell-shock, they have started to lend again and competition is beginning to heat up in the mortgage market.

Getting a Gran Canaria mortgage

To get a mortgage you must have a 20% cash deposit (plus the 10% in cash that it costs to buy a property in Gran Canaria) and prove to the bank that you can make the repayments. In general, they only lend if your liabilities (existing loans, mortgage payments) represent less than 35% of your monthly income.

For example, if you want to take out a mortgage which will be 350 euros a month, you must earn 1000 euros a month and not have any other loan payments. They will check your ability to pay by requesting the following documentation…

  • wage slips from the last 3 months
  • bank statements for the last 6 months
  • If you are self-employed, copies of your last 3 years of accounts (with an auditor’s stamp) and copies of you last 12 month’s business bank statements and your last 6 months personal bank statements).

As always, you will need to feed the photocopier with your ID, residencia and the one piece of paper you didn’t bring with you. 

Banks in Gran Canaria do NOT take future rental income into account when calculating the amount of money they will lend you to buy a property.

Spanish banks currently offer mortgages of 60-80% of what a property valuation firm says that it is worth (you pay about 300 euros for this valuation as part of the mortgage application process).

Most banks offer variable rate mortgages that last from between 12 and 40 years.

2017 update: Residents can now borrow up to 90% of the purchase price from the right bank.

Gran Canaria mortgage interest rates

Interest rates in Spain vary, but are generally a little lower than in the UK. The rate is set using the EURIBOR interest rate published by the European Money Market Institute.

Your mortgage rate will be expressed as EURIBOR plus a percentage (eg. Euribor más 0.75%) and varies depending on whether the EURIBOR rises or falls. With the rate currently negative, mortgages in Spain are at rock bottom levels.

It is always worth applying to several banks (you only have to gather the paperwork once) as the rate, property valuation, and other conditions vary considerably between banks and you never quite know what headquarters in Madrid (all applications are sent to Madrid for approval) will say.

There is no harm in playing the banks off against each other.

Ask for a copy of one bank’s offer and then take it to a different bank to see if they can improve the offer – they often will. Then take the improved offer back to the original bank – you may get a pleasant surprise.

 Gran Canaria Mortgage costs

During the mortgage application process, you have to pay for a valuation by a professional valuation firm (200-300 euros) and you will also pay a gestoria (bureaucracy consultant/paperwork company) to handle all the paperwork (around 250 euros); your bank will assign one, you’ll pay for it.

Spanish banks have a habit of attaching other products to their mortgages to boost their profits. For example, you will have to pay for annual life insurance that covers the entire mortgage, and property insurance that covers its replacement value in the case of a fire, etc. Often you get the best interest rates if you agree to their add-ons.

Non-resident mortgages in Gran Canaria

Non-residents need a minimum deposit of 30% plus the 10% in fees and taxes that you need to buy a property. That’s a minimum of 40% of the value of a property befoe you can get a mortgage as a non-resident.

You may also be asked to provide an aval (guarantor). This will be somebody usually based in Spain who agrees to pay in the event of you being unable to.

New Build Mortgages

As well as paying slightly more IPT tax (7% rather than 6.5%), buying a new build property has the disadvantage that the constructor (builder) or promotor (promoter) often has a mortgage deal agreed with a particular bank. The rates and conditions are fixed and you have to accept them.

Changing mortgages

With rates as low as they are at the moment, there is rarely much benefit to changing your mortgage provider as the process is long and expensive (fees are around €3000). However, if you are locked into a mortgage with high rates, it is worth looking into.

The Clausula Suelo

Spanish banks used to put a floor under the interest rate on their mortgages which basically locked in their profits if interest rates dropped. However, the EU has ruled this floor, known as the clausula suelo, illegal and told the banks to scrap it and TO RETURN ALL THE EXTRA, ILLEGAL INTEREST THEY COLLECTED.

If you have a mortgage in Spain with a clausula suelo, you are entitled to go to your bank and demand that they return all the excess interest you paid over the years.

These sums can be substantial so don’t expect your bank to hand it over without a scrap; They aren’t exactly falling all over each other to obey the courts.

Rather than give you the cash, the bank knocks what they owe you off the outstanding mortgage debt.

For the latest on this story, please read this article.

The best Gran Canaria mortgage banks

Mortgage offers change all the time so we recommend that you shop around extensively and apply at several different types of bank…

  • The traditional Spanish banks such as BBVA and Santander
  • The local banks such as Bankia and / or a Spanish caja (equivalent to a building society and just as endangered).
  • A foreign bank such as Bankinter and Deutsche Bank
  • An alternative bank such as EVO.
  • Online banks such as ING Direct.

Help getting a Gran Canaria mortgage

If you speak fluent Spanish and know the local property market, feel free to ignore this advice and use a local mortgage broker or go direct to the banks.

Use a good local estate agent when you buy a Gran Canaria property: They will help you with the process of getting a Gran Canaria mortgage and make sure that you pay a fair price for your property.

Best of all, estate agency services are free for the buyer as the seller pays all their fees.

In Las Palmas and north Gran Canaria, talk to Laura at Las Palmas Property and read their guide to getting a Gran Canaria mortgage in 2017.

In south Gran Canaria, just go to Cárdenas Real Estate.


Really Useful Tips For Buying A Gran Canaria Property

Useful Gran Canaria property tips for a safe and happy property purchase

Useful Gran Canaria property tips

Property in Gran Canaria is well regulated and most purchases are straightforward (within the boundaries of Spanish bureaucracy). These useful Gran Canaria property tips will guide you towards a happy purchase.

How to buy a Gran Canaria house

Most people buy through estate agents but private sales are legal. We advise anyone buying without an agency to get a local lawyer before signing anything. Never sign a contract in an office: Go to a notary as they double-check contracts for anything fishy.

Estate agent services are free to buyers as the seller pays their fees. It makes no sense to buy in Gran Canaria without a good estate agent. They check all documentation, prepare legal contracts, and know what to look out for.

Gran Canaria property tips

Where to find Gran Canaria properties

Most for-sale properties are now advertised online. VibboIdealista and Fotocasa are the main Spanish property portals. You see a mix of private sales and agency properties.

Look out for signs in windows and ask in locals shops and bars (especially if you are searching in rural areas).

Check estate agency windows or ask an estate agent to search the shared property database for property. Since most agencies pool their properties, this is almost always the best way for foreigners to search for Gran Canaria property.

If you’re looking for a good agency, start here …

In south Gran Canaria, go to Cárdenas Real Estate. They are one of the island’s oldest agencies and focus on south Gran Canaria.

In Las Palmas, contact Las Palmas Property. Laura works for RE/MAX Cony Overseas, one of the city’s best agencies. She specialises in property in and around the capital city.

Agencies provide you with an accurate market price for any property. This is important as there are still owners listing their property at unrealistic prices.

Gran Canaria House Prices

Prices have fallen by as much as 30-40% since the boom years before the crisis.

Property in Gran Canaria is generally cheaper per square metre than in northern Europe. Locations such as Las Canteras in Las Palmas and close to the sea in the south are expensive due to high demand.

Gran Canaria Mortgages

Banks in Gran Canaria are cautious about lending and only lend according to the value of the property.

They get all properties valued by a tasador before they agree yo lend. See our detailed guide to buying a Gran Canaria property for more on mortgages and banks.

What to watch out for

Older and rural property often has extensions that aren’t registered by the property registry. Any changes must be registered before you buy.

Don’t take anyone’s word for information about things like empty plots next to your home. You can check what permits they have at the Ayuntamiento and should do.

Overall, property purchases are safe as long as you get good advice, use your common sense and insist on full transparency from all parties.

Costs of buying a house

The taxes, lawyers fees, mortgage fees etc. will add up to about 10% of the value of the house.

Haggling

Haggling can be effective, especially if for property valued above its market price, or in a low-demand areas. Most owners expect to give a small discount.

Don’t expect a large discount on properties in popular areas like the Las Canteras beachfront.

Overall, we advise all foreign buyers in Gran Canaria to use the services of a good estate agent, and to double-check everything before signing the contract.


The Guru Guide To Buying Property In Gran Canaria

Beach front property in Gran Canaria

Beach front property in Gran Canaria

Buying property in Gran Canaria is a relatively straightforward process if done correctly. The island property registry is excellent, property rights in Gran Canaria are clear, and all contracts must be signed in front of an independent notary.

However, there are pitfalls and we advise all buyers to use a quality estate agent and / or a local lawyer to check their chosen property and contracts.

Estate agents in Gran Canaria

Estate agents in Gran Canaria vary from the average to the excellent with a couple of outlying dodgy outfits (targeting non-resident buyers in the resorts).

Estate agency fees are 5% of the sale price of a property but are paid by the seller. This means that their services are free to buyers; All non-native Spanish speakers should use one when buying property in Gran Canaria.

The risks of going it alone are just too high to bother with as disputes takes a long time and oodles of cash to resolve.

To find a good estate agent in Gran Canaria, look for the following…

  • An estate agency with an office you can visit and a good local reputation.
  • An agency that is connected to the BOICAN shared property database and can, therefore, show you almost any for-sale property in your chosen area.
  • An agent that speaks your language and good Spanish.
  • Above all, choose an estate agent that cares about you, rather than about selling you a particular property.

The benefit  using a good estate agency include their ability to value a property accurately (many sellers list their property at the price they’d like to get rather than what it is currently worth), the help they provide with paperwork, and good relationships with reliable local banks.

In Las Palmas and the north of Gran Canaria, we recommend Las Palmas Property.

In south Gran Canaria, just go to Cardenas Real Estate; One of Gran Canaria’s oldest and most trusted agencies.

NOTE: Do not buy a rental investment property in south Gran Canaria without getting expert advice:

The cost of buying property in Gran Canaria

The total cost of buying a property in Gran Canaria is roughly 10% on top of the price you pay.

This sum includes:

  • Fixed property purchase tax (the exact percentage varies depending on property type and Municipality)
  • Notary costs (a fixed percentage of the value of the property)roperty registry costs.
  • Property registry costs.

NOTE: The 10% figure is approximate. It can be up to 12% if you buy a cheapie under €100,000 and lower if you buy something substantial.

NOTE: Seek expert advice if a seller wants you to pay a percentage of the purchase price in cash under the table. This is illegal and has tax implications as the government knows what property is worth and asks for extra taxes on properties that are bought too cheap.

Ongoing costs include:

  • Monthly Communidad fees (if you buy in a building or complex)
  • A small annual tax on the value of the land your property sits on (known as the IBI)
  • Utility bills.

There are no council tax bills in Gran Canaria.

What you need to buy a property in Gran Canaria

All buyers must have:

A Spanish NIE number; This fiscal identification number, which you will soon learn by heart, is the same number that goes on your green Residencia paper. Getting a NIE is a faff unless you have a job contract or a pre-contract to buy a property (or are a non-EU citizen investing 500,000 euros in Spanish property; Hello Golden Visa).

A local bank account; Opening a non-resident bank account is straightforward. All you need is a passport. Change to a resident’s account once you get Residencia as the fees are lower.

Getting a mortgage in Gran Canaria

Spanish banks learned their lesson rather too well during the crisis and are now cautious about lending money to home buyers. You need a minimum deposit of 20% (unless you earn big money) and a work contract to even be considered (or a long track record of earnings as an Autonomo or self-employed person).

New arrivals often have to wait a year to get a mortgage, even with a permanent work contract. This might seem infuriating, but it’s no bad thing if you consider the number of people who go home after a year in Gran Canaria; not everyone can handle the sunshine and the rum.

Spanish banks currently won’t lend you more than you can pay back with a third of your total income.

Non-residents need a larger deposit (typically 40%) and proof of earnings in their home country going back six months. Spanish banks are unwilling to lend to older non-residents who are due to retire before their mortgage term is up.

Mortgage applications are long-winded (up to three months at some banks) and hampered by top-down management at Spanish banks. Your application is submitted in Gran Canaria but goes to Madrid (it’s always Madrid) by post for approval. Any missing documents cause delays that nobody is accountable for; Be vigilant and don’t be afraid to push as silence is often a bad sign.

The best advice we can give you is to apply to several different banks; They all require the same paperwork so all you have to do is spend a few hours at each one and feed them with photocopies.

At the moment, the best banks are the international ones such as Deutsche Bank and ING Direct, rather than the local banks like Bankia, Santander and BBVA.

International banks are faster, often offer better rates, and are more flexible with foreigners than hidebound Spanish banks.

Renting Your Gran Canaria Property

See this article for details on how to rent your property in Gran Canaria.

Summary

Use a good estate agent

Factor in costs

Apply to several banks if you need a mortgage

Be determined and patient