Buying a flat in Spain – a sort-of guide for expats and others

Morena and I recently became homeowners.

How? you ask.

Well, Barcelona’s not cheap, but I guess we did it the normal way: by paying a huge down payment and taking out a 30-year mortgage.

Buying a flat in Spain isn’t too hard, as it turns out – as long as you’ve got some money saved.

But – and this is a big but – real estate prices often aren’t in line with local salaries, so a lot of people struggle both to rent and to buy.

More about Spain’s failed attempts to provide its citizens with basic housing later.

First, let’s tackle the big question on everyone’s mind…

To buy or not to buy?

I’d always had certain philosophical qualms about buying a house.

“Why be tied down?” I thought, “when you can have the flexibility to pick up and move?”

Or: “Why pay 6% interest on something the bank owns anyway? I’ll end up paying double or more, in the end.”

Or: “Those people who say that real estate is the best investment have clearly done absolutely no research into what real estate is, or what the word ‘investment’ means.”

This type of thinking got me through my 20s, a time when I was also broke as a joke and living in Spain illegally – renting rooms in shared flats in some of the worst neighborhoods of Madrid.

And it got me through my 30s, when I was renting on my own or with Morena, in a series of somewhat better places in Madrid and – later – Barcelona.

With time my excuses shifted. “Why buy a place in Barcelona if we’re only here temporarily?”

Years passed. Eventually, our situation started feeling less temporary.

“Why buy a place when renting is cheaper?”

That was during the pandemic, when the rental market was depressed. But then, rent prices started going back up. A lot. Morena was keeping track, and started hinting that when our current lease ran out, we were gonna be screwed.

She’d show me the current ads on Idealista. The idea of paying 50% more to rent a normal-sized flat started to sway me in the direction of buying.

Finally, grasping at straws, I’d say, “Well, I really don’t want to be one of those boring bourgeois types who sits around talking about mortgage rates.”

“Rent prices have gone up 20% in the last year,” said Morena. “But prices to buy are staying stable.”

I did some math. Goddammit. Looks like we’re gonna buy a flat.

“Set up some visits”, I said.

And she did. And as of about a week ago, we’re homeowners.

How to buy a flat in Barcelona

But back to the whole home-buying process.

Doing a bit of research, we quickly discovered that we were in no position to continue living in our current neighborhood. Our rent was locked in at covid prices, from when most of the international people just left Barcelona and real estate tanked. But moving forward, living in this barrio was going to be a struggle.

So we chose a few other areas to look at, and Morena set up some appointments with estate agents.

(Our preferred neighborhoods, in case you’re wondering, were Sant Martí, Clot and Poblenou. Not too central, not too expensive, not too touristic, and – importantely – not full of buildings constructed in the 18th century.)

Most of the places we ended up seeing were what they call “para reformar” in the local parlance – in my town, we’d just call them total dumps. “Para reformar” means someone was living there for 40 years without remodelling, the fixtures are mostly from the early years of Franco’s dictatorship, and you’re going to have to spend another 50,000€ just to make the place habitable.

No thanks.

Our criteria, on the other hand, were pretty simple: not in an ancient building, has balcony, has light during the day, not on a noisy street, has at least two bedrooms, and doesn’t need a huge remodel. Most of the places we saw failed on multiple counts, but finally we found a place in Clot that was pretty good and within our budget – and most importantly, didn’t need any remodelling – so we made an offer.

(I should mention that we only saw a dozen places, and the whole flat search took us about three weeks. This shocked most people we talked to, because they’d all spent a year or two looking for flats before finding something they liked. I didn’t see the point of wasting a ton of time looking, though, and Morena agreed.)

So, let’s talk about interest rates.

Getting a mortgage in Spain

The day after our offer was accepted, I sat down to apply for a mortgage.

Now that I’m one of those boring bourgeois types who sits around talking about mortgage rates, I’ve done the math and realized that a one-percent shift in the interest you’re paying makes a big difference in your financial situation.

Fixed rates are much better than variable, and the lower your rate, the lower the monthly payment.

Since Openbank seemed to have the best rates around – around 2.5% – and I’d been happily using them for years, I applied with them first.

After a long day uploading an insane number of documents proving our identities and joint income, I got a phone call from a mortgage broker. He’d clearly just read an article that told him to smile while making phone calls. You could hear him smiling across the line.

“Just give me two or three days to run this by our risk department,” he said, “and by Friday you’ll have a mortgage.”

That was reassuring. But Friday came and went without a call from Señor Smiley. So did Monday.

I was starting to get worried.

On Tuesday, I called him. He clearly wasn’t smiling this time.

“Sorry, can’t do it, don’t know why, risk department just rejected your claim, no explanation, okay bye!” I’m paraphrasing, but that was the gist of it.

So, rejected by Openbank, I applied to everywhere else I could find. I don’t want to bore you with the details, but I used a broker called Trioteca and also applied on my own to several banks.

In the end, Trioteca got it done for us – we got a good 3.6% fixed rate, and the monthly payment is going to be even lower than what we’re currently paying in rent.

The home-buying process – and unexpected expenses

The process of buying a house itself wasn’t too bad, but it took a while.

As usual, this is not legal advice, but here are the steps we went through to buy a flat in Spain. Maybe it’ll help orient you on your home-buying journey. And one additional caveat: we’re here in Barcelona, and some of this depends on Catalan law. If you’re buying a house in Madrid, Mallorca or Murcia, your situation might be different.

The first thing we did, after our offer was accepted, was pay 2000€ as a “reserva”, just to get the place off the market. After that, we could proceed to the “pago de arras”.

The flat we liked was being sold by a law firm as part of an inheritance, so we saved several percentage points in fees that we otherwise would have had to pay to a real estate agency. A lawyer at the firm drew up a “contrato de arras” and we went along to sign. The word “arras” was new for me – it’s a down payment, in this case 10%.

In theory, if we backed out of the deal, the owners would keep our money. If they backed out, or if we couldn’t get a mortgage, we’d get the money back… But that’s just in theory, and I had my doubts.

Also, at this point, I was still trying to get a mortgage after the rejection from Openbank, so I was more than a bit nervous about shelling out tens of thousands of euros as a down payment. But I sent the money, hoping for the best, and eventually we got three different mortgage offers – as well as two rejections and a couple of no-starts (banks that just never got back to us).

The mortgage we ended up accepting requires us to have a joint account, to buy homeowners insurance, and to put money in every month – we get a discount on the interest rate (further lowering the payment) if we add more than 1200€ to our account every 30 days.

So… all good in the hood. We spent a couple of mornings at the bank, signed a ton of papers, and were ready to go. We got a document from the land registry saying there were no other mortgages on the property. The bank sent out an appraiser to see the flat, and the building.

Finally, we signed the final list of terms and conditions, called the Ficha Europea de Información Normalizada – our contact at the bank called it “la FEIN”.

After that, both Spanish and Catalan law mandate a cooling-off period in which you go to a notary. They explain the details of the mortgage contract to you, then quiz you to make sure you’ve understood everything.

After that, you can set up another date to sign the final documents, and you’re off to the races.

The crushing Catalan property tax

I try not to spend all my time on here complaining about Catalonia – who am I to criticize the noble leaders of this tiny, non-independent ethnostate? But in this whole process, I was rather shocked and chagrined to find that the Catalans charge one of the highest percentages of property tax in Spain.

Buying a flat or house in Catalonia will cost you an extra 10% in property transfer tax – officially, el Impuesto de Transmisiones Patrimoniales. There’s also a tax for the mortgage signing, payments to the notary and the gestoría (the people who manage the bureaucratic end of the whole thing) and more.

Plus, the mortgage was only for 80% of the property’s sale price, so we had to pay another 10% of the total price to make up the difference after the arras.

Ten per cent for the “arras”, another ten at the signing. Ten per cent to the Catalan government. You might have to add a final 10% in VAT tax if you’re buying a newly-constructed home – ours is previously owned, so we didn’t personally. And you may have to pay an agency fee. In any case, we’re talking 30 to 40% of the sale price paid up front by the buyers…

That’ll be six years rent, please

In a country where a huge number of people are earning 1500€ a month, that’s a lot of money.

(Back when I was an English teacher, 1500€ was a really good month. And when I met Morena, she was a doctoral student living on some scholarship money – not much, if I recall. Being highly qualified or employed in a useful field doesn’t necessarily mean you’re making a good salary, here in Spain.)

These days, fortunately, we’re doing fine. But it made me think about the reality of this system for people with regular (low) Spanish wages: flats aren’t cheap, if you’re living in the city. And how are you supposed to get together tens of thousands of euros for a down payment, taxes, etc, if you’re earning 18,000€ a year – and probably paying rent in the meantime?

A lot of people, I suspect, get help from their parents when it’s time to buy a flat. Others just rent for decades, or wait for City Hall to build more subsidized housing.

Either way, it seems rough. I’ve been in Spain for almost 20 years now, and we’ve been hearing about the insane prices of housing for most of that time – except during the great real estate crash during the last recession, when suddenly nobody could sell at any price. A permanent real estate crisis, in other words.

The newspaper El País, the other day, published an article called La generación que no puede comprar vivienda about the fact that young people have a lot of trouble buying houses – “young” meaning ages 30 to 45, in this case. Is this a new problem? No. Actually, I feel like I’ve read similar articles at least 100 times through the years.

In other news, there’s the story of how hard it is to rent a flat – and the government’s new Ley de Vivienda has apparently only made it harder.

All this contributes to the fact that the average age for Spaniards to leave home is one of the highest in Europe, about 30 years old. And the other fact that a lot of households fall into de facto poverty after paying their rent or mortgage every month.

Signing the mortgage and becoming homeowners

The morning of the signing, we sat in a board room with several people who spoke Spanish to us and Catalan to each other: the current owners, a couple of lawyers, the gestor who would be moving the money.

Our bank had put a couple hundred thousand in our joint account, which the gestor would soon transfer to the owners – they were three people in their sixties who (apparently) weren’t on speaking terms. Relatives of the previous owner, presumably, liquidating their inheritance.

At one point, they gave us a copy of the light bill so we can change it over, and I noticed the name. I nudged Morena. “The woman who lived in the flat was named Adoración.”

One of the old ladies spoke up: “In those days people were named according to the calendar of saints. She was born on January 6th, so her full name was Adoración de los Reyes”.

Not a lot of people from that generation are left, and even fewer are naming their daughters Adoración de los Reyes these days. After that, we all sat in awkward silence.

Finally, the notary showed up with some documents. He mumbled his way through the terms and conditions. We all agreed and signed. The next thing we knew, they were handing over the keys and the guy from the bank said “You can go now.”

In the end, the whole signing took less than an hour, and half of that was spent waiting for the notary.

Outside, Morena and I waved down a taxi to the new house. All the furniture had been removed, so it’s an echoey empty space now. With some paint, appliances and furniture, we’re hoping to turn it into a home.

So… is real estate a good investment?

I have my doubts about real estate as an investment.

Or, to put it more clearly: I have my doubts about the people who claim that the house they’re living in is also part of some brilliant wealth-building strategy.

My understanding is that home prices generally keep pace with inflation, over time, and that the extra expenses of owning tend to even out the money you’re saving by paying a mortgage.

In our case, the mortgage payment is about 140€ less than what we were paying as rent. But now we have to pay for comunidad, and property tax, and homeowners insurance, and repairs – not to mention buying our own furniture and appliances. So in the end, it’s going to be about the same.

And don’t get me wrong: I’m happy we’ll be paying a lower monthly rate, but if we consider the massive down payment and property transfer tax, we’re paying the equivalent of six years of rent before we can even move in. It’s a huge capital investment in order to eventually “save” that money.

Also, let’s take into account that there’s always quite a bit of uncertainty about future prices – Spain could go back into crisis, Catalonia could declare independence and tank everything – and you’ll see why I’m not just assuming this is a “double your money in five years and move on” sort of situation.

Is renting a waste of money?

Spanish (and other) people will say that “renting is throwing your money away”, but I continue to assert that if you can rent at a low price relative to buying, it’s worth it. With, of course, the caveat that you should always attempt to live below your means, have an emergency fund and not make big life decisions without doing some research.

Anyway, the expense of this whole situation has also made me understand why renting or living with parents is the only option for a lot of people.

A few Spanish banks are allegedly giving 90% mortgages to younger people. But even so, you’re going to need tens of thousands of euros to get into a place, and most young people just don’t have that.

On the other end of things, the government occasionally says it’s going to do something about the whole rental market situation, but the results are mixed. The new Ley de Vivienda passed earlier this year, for example, has so far only gotten more landlords to take their flats off rental the market, or offer 11-month leases that limit tenants’ rights.

Working all day for a normal Spanish salary, and then going out and trying to rent a decent flat (without the help of rich parents) in a major city is a depressing and sometimes insulting experience. Unfortunately, it an experience that I suspect very few members of the government have actually had.

And now, to pay off this damn mortgage.

A few days after signing the mortgage, Morena and I walked down to the beach.

Strolling along, enjoying the November sun, we soon turned to that most exciting of “married life” conversations: what to have for lunch. Morena suggested we go to our favorite Indian restaurant, down at the end of Barceloneta neighborhood. It’s called Rangoli, the people are nice, and they make a pretty good lamb roganjosh.

But my response was: “The two of us here drowning in a sea of debt and you’re thinking about Indian food?”

I know I was being unreasonable, but it’s hard to wrap my head around the idea of owing hundreds of thousands of euros to the bank. Surely we should be cutting back on all our expenses. Being in debt, as the financial independence people say, is an emergency! And it should be treated as such.

Morena talked me down, and we walked to Rangoli. (It was closed.)

Allegedly, most people are stressed about paying a mortgage at first, but after a few months, they settle in and get used to it. I’m still pretty annoyed by the whole concept, but it’s only been 10 days. We’ll see how I feel about the whole thing this time next year.

For now, I’m off to celebrate my 41st birthday. It’s been a long road, what with the illegal immigration, the semi-poverty, a global recession, some online dating and a pandemic, but I’ve finally arrived at full adulthood – married, home-owning, and spending my evenings looking at furniture on the IKEA website.

Time to pay that mortgage. See ya on the other side.

Daniel AKA Mr Chorizo.

P.S. Like I said, I’m turning 41 in a few days. So far, this year has been better than last year, which I wrote about in my instant classic article about turning 40. Then there’s the article about my big South Indian wedding, informally subtitled Mr Chorizo Finally Settles Down. Enjoy!