Here you will current news and articles of interest about the real estate sector

Taking out a mortgage is a very important financial decision and multiple factors must be considered before making a decision. Here is a list of the main issues you should consider:

1. Mortgage type.

• Fixed rRate: The interest rate remains unchanged throughout the term of the loan. It offers greater stability but usually has a higher initial interest rate.
• Variable rate: The interest rate varies based on the reference index (usually the Euribor). The initial installment is lower but there is a risk of interest rate increases.
• Mixed rate: Combines an initial fixed-rate period with a subsequent variable-rate period.

2. Interest rate.

• APR (Annual Percentage Rate): Includes not only the nominal interest, but also fees and other charges.It is the most reliable indicator for comparison.
• NIR (Nominal Interest Rate): This is the "pure" interest, without any additional charges.

3. Monthly installment and capacity payment.

• It is advisable to consider and analyze how the installment would be affected by possible interest rate increases if you choose a variable-rate mortgage.
• You should ensure that the monthly installment does not exceed 30-35% of your net income.

4. Repayment term.

• The longer the term, the lower the payment, but the more interest you'll pay overall.
• Choose a term that allows you to live comfortably without overpaying in the long run.

5. Fees and associated expenses. 

• It is advisable to find out about the fees for opening the mortgage, early repayment (repaying part or all of the loan capital ahead of schedule), subrogation (transferring the mortgage to another bank to obtain better terms), novation (changing the conditions with the same bank), etc.
• Under the new Mortgage Law many of the fees associated with a mortgage must be covered by the bank (such as Notary fees, Property Registry fees and administrative fees).

6. Linked products.

• Some banks offer better terms if the buyer takes out insurance, credit cards, pension plans, etc.
• Consider whether you really need these products or if they make the mortgage more expensive in the long term.

Increases in value resulting from the following are exempt from paying capital gains tax:

a) The creation and transfer of any easement rights.

b) Transfers made by persons as a result of the transfer in lieu of the habitual residence of the mortgage's debtor or its guarantor, for the cancellation of debts secured by a mortgage on that property.

c) Transfers of the habitual residence made in notarial or judicial foreclosure proceedings in which the requirements indicated in the previous section are met.

d) Transfers of properties located within the perimeter defined as a historic-artistic site or that have been individually declared to be of cultural interest, when their owners or holders of real rights can prove that they have carried out conservation, improvement or rehabilitation work on the aforementioned properties at their own expense.

On the other hand, the Law Regulating Local Taxes allows local councils to grant discretionary discounts in certain cases. In the case of Sant Cugat del Vallés, the following discounts are established:

a) In transfers by inheritance when the acquirer is a first-degree ascendant or descendant by blood or adoption:

- 95% discount if the primary residence is acquired.
- 50% discount if the acquired property is not the primary residence.

b) In transfers by inheritance where the acquirer is the deceased's spouse or other de facto or de jure unions with identical rights recognized in the tax system:

- 95% tax relief if the primary residence is acquired.
- 60% tax relief if the acquired asset is not the primary residence.

c) In inheritance transfers from parents to children or from children to parents of premises used for economic activity, if the activity is maintained, will benefit from a 75% reduction.

The definitive enjoyment of the reductions is conditional upon the purchaser maintaining the property in their estate and continuing to carry out the same economic activity in the case of section c), for four years following the death of the deceased.
In the event of non-compliance with the maintenance rule a supplementary self-assessment of the subsidized portion must be submitted.

For the purposes of applying the subsidies the habitual residence is defined as the address of the deceased in the Municipal Residents' Register. However, the residence will not be considered to have lost its habitual character if the removal from the register was due to sufficiently proven health reasons.
Up to two parking spaces and a storage room may be included with the primary residence, provided they are located in the same building or urban complex as the transferred residence.

When renting a property a common concern for landlords is how to guarantee rent collection.

Below are some guidelines you can follow and different options available to you to ensure, as far as possible, rent collection.

1. Solvency assessment of the potential tenant.

This involves analyzing and evaluating the potential tenant's economic and financial situation to determine whether they will be able to comfortably cover the rent and other expenses.

The usual approach is to gather information about the potential candidate that includes their profession, whether they are employed or self-employed, job stability, monthly income, any debts they are currently paying, references from the landlord of the property where they currently reside, etc.

2. Consult a register of defaulters.

Another way to verify a person's solvency is to check if they are listed in any register of defaulters.

These registries are files containing data on individuals and legal entities that have defaulted on the payment of a debt. They are a very useful tool for assessing the risk of non-payment by a person or entity before granting credit, renting a property, signing supply or insurance contracts, granting a subsidy or financial aid, etc.

The most well-known registers of defaulters in Spain are: ASNEF, RAI and BADEXCUG.

3. Provision of a legal deposit and other additional deposits.

The Urban Leasing Law (LAU) establishes, on the one hand, the obligation to require and provide a deposit equivalent to one month's rent for residential leases and two months' rent for leases for non-residential use. This deposit is known as the legal deposit.

The LAU also allows any type of additional guarantee to be agreed upon, such as an additional or supplementary deposit. However, there is a limitation on this additional deposit in the case of residential leases, specifically for contracts of up to five years' duration, or up to seven years if the landlord is a legal entity. In such cases the value of this additional guarantee may not exceed two months' rent.

In the case of leases for non-residential use no limitation is stipulated.

4. Taking out insurance against possible non-payments.

Another option that allows us to guarantee the collection of rent is taking out non-payment insurance.

The usual coverage for this type of insurance is as follows:

• Non-payment of rent: Covers a specified number of unpaid monthly payments, usually between 6 and 12 months.
• Legal defense: Covers legal expenses arising from eviction proceedings and claims for damages.
• Vandalism: Covers material damage caused by the tenant to the property up to a specified amount, usually €3,000.

Prior to taking out the insurance, the insurer will conduct a creditworthiness assessment of the tenant to assess the risk of non-payment.

The cost of this type of insurance usually ranges between 3 and 5% of the annual rent.

5. Joint and several guarantors.

A joint and several guarantor is a person who agrees to respond to the debt of another person or entity assuming the same responsability as the principal debtor.

The main characteristics of a joint and several guarantor are as follows:

• Direct liability: The guarantor is liable in the same manner as the principal debtor.
• Waiver of benefits: The guarantor waives certain benefits such as exclusion (demanding payment of the debt first from the principal debtor until their assets are exhausted), division (in the case of several guarantors, claiming a proportional share of the debt from each guarantor) or order (claiming first from the principal debtor before the guarantor).
• Total and patrimonial liability: The guarantor is liable for 100% of the debt with all their assets, both present and future, until the debt is fully extinguished.
• Validity of the obligation: The guarantor's liability persists throughout the contract.

Municipal capital gains tax (officially known as the Tax on the Increase in Value of Urban Land) is a tax levied by the City Council when an urban property is transferred (whether through sale, inheritance or donation).

With the latest regulatory reform implemented following the 2021 Constitutional Court ruling, two methods were established to determine the taxable base for the aforementioned tax, allowing the taxpayer to choose the most beneficial one.

The methods are as follows:

- Objective method (based on coefficients).

Applied by the Administration by default.

The tax base is the result of multiplying the cadastral value of the land in the year of the property transfer by the coefficient assigned according to the number of years elapsed since acquisition until transfer.

Formula:

Taxable base = Cadastral value of land × Coefficient assigned to the period of      generation of the value increase.

Taxable amount = Taxable base × Tax rate

- Real method (direct estimate).

It is applied when the taxpayer expressly requests it because it is favorable.

The real profit obtained is taken as the taxable base. To do this the difference between the transfer value and the acquisition value is calculated and the percentage representing the land's cadastral value in relation to the total cadastral value of the property in the year of transfer is applied to this amount.

Formula:

Total gain = Transfer value - Acquisition value

Land value ratio = Cadastral value of land / Total cadastral value

Taxable base = Total gain × Land value ratio

Taxable amount = Taxable base × Tax rate

The deadline for paying the capital gains tax is thirty business days from the date of transfer, except in the case of inheritances where the deadline is six months from the date of death, extendable to one year if requested in writing during the first six months.