Buying a second home in Spain: everything you need to know

Second home in Spain

For a long time, Spain has been a popular destination for second-home buyers. Over the years, the second-home buying process has evolved significantly, becoming more convenient and transparent, offering more opportunities for Spanish and foreign buyers.

However, is buying this type of property profitable? If you're thinking about taking the leap, you should consider these issues first.

What is a second home?

A second home, also known as a holiday home, is a residential property not used as a primary residence but for leisure, as a holiday home or purely as an investment.

Regardless of the specific use or location, a second home is generally characterised by being separate and additional to a first home. It is a property that offers a change of pace, an opportunity to escape from routine and a place to create lasting memories with family and friends.

Buying a second home with a mortgage

Buying a second home with a mortgage is possible, although there are some important considerations to be aware of. For example, mortgages for second homes tend to have higher interest rates and shorter repayment terms than primary residence mortgages.

Bear in mind that the bank considers the second home to be a higher-risk product, since, in the event of non-payment, paying the primary residence will be prioritised. In addition, you must meet a series of requirements, such as having a stable job and previous savings.

Remember that when buying a second property you can take out a new mortgage or extend your current mortgage.

Can I buy a second home as my first home?

You can buy a second home in Spain and treat it as your first home. To do so, you must register yourself in the new home and declare it as your tax address. You can do this by filing the form "Form 030. Taxpayer Register - Register declaration, for registration, change of address and/or change of personal data."

On the practical side, for a property to be considered a permanent residence, you must have lived there continually for the last three years or have lived there effectively and permanently for the first 12 months after the purchase date or since construction was completed.

Remember that the authorities can verify that the property is actually being used as a habitual residence, for example, by checking the utility bills.

Advantages of buying a second home

Buying a second home can be a significant investment, but it also provides several benefits that can make it worthwhile:

Holiday accommodation: One of the main reasons people buy a second home is to always have accommodation during the holidays. Forget about looking for hotels or holiday rentals; with your own home, you can organise your getaways spontaneously.
Savings on accommodation:34% of Spanish families' holiday budget is spent on accommodation. With a second home, you will save on these expenses. Moreover, your home will be equipped for your needs and preferences, which makes it a quality accommodation.
Profitability:If you decide to rent out your second home, you can earn additional income. Many families rent their second homes out during the rest of the year and enjoy it in summer. It is a long-term investment that can generate financial returns.
Increased wealth:Buying a second property diversifies your assets and increases your wealth. It is an investment that can increase in value over time.

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Disadvantages of buying a second home

Buying a second home can also include some drawbacks, such as:

Fixed expenses: Even if you only use your second home during the summer months, there are fixed costs such as property taxes, community fees and utility bills.
No financial returns: An empty second home does not generate income and is like having money "under the bed", without being able to take advantage of its potential profitability, which is estimated at 5.6% gross on average.
Additional income taxes: Second homeowners have to pay additional taxes, such as the Real Estate Tax (IBI), which cannot be deducted from personal income tax unless it is rented.
Difficulty in obtaining financing: Banks usually only finance up to 70% of the second home's total value, which requires a higher down payment.
Risk of squatters:Empty properties are at a higher risk of being squatted, which can lead to additional problems and costs for the owner.

Requirements for purchasing a second home

For a property to be considered a "second home", it must meet a series of requirements, such as, for example, that the buyer already owns another property, regardless of whether it is his or her habitual residence or not.

Moreover, proof of income and employment stability is essential, as banks usually require it. Remember that the mortgage conditions for a second home are stricter.

Another factor to consider is having savings in advance. Normally, banks will only finance up to 70% of the second home's value, so you need to have the rest available to cover the payment for the property.

Administrative formalities are also essential. As for the first home, you must complete the purchase formalities, such as the public deed, paying taxes (ITP or VAT) and registering with the Land Registry.

Tips when buying a second home

Buying a second home is an important decision that requires planning and consideration. Here are some tips and recommendations to keep in mind:

Assess your financial resources:Before buying, make sure you have enough money saved. In Spain, they recommend having at least 20% of the house's total value when applying for a mortgage. Also, consider variable expenses such as electricity, water and gas. An additional 10-15% savings for these expenses is recommended.
Research mortgage and financing: Most people will need a mortgage to purchase a second home. Check out the banking options and choose the best one for your needs. Compare factors such as interest rates and terms in years.
Before buying, check the general state of repair:Check plumbing, electricity, floors and possible damp. Consider whether you will need to renovate in the short term.
Find out if there are any outstanding charges or debtsassociated with the home and check local taxes and other related expenses.
Choose a location that meets your needs.