The coronavirus crisis has changed the preferences of many Spaniards: some choose to look for a house on the outskirts of big cities, others prefer the center of the city to live. But the operation of selling the usual home to buy another is not without complications: the hiring of a new mortgage, the cancellation of the old one, etc.
What is the situation of the real estate market?
It is important to know well the evolution of the price and also the terms of sale corresponding to the neighborhood of the house to be sold. It is also recommended to study what is the forecast of the evolution of the value of the properties for the next months (in case it is convenient to wait), as well as to consider the possibility of including in the search of the new house those locations in boom that are in process of expansion. Although they are currently not very attractive, they offer the opportunity to buy at a good price, allowing to obtain a greater benefit during the process, since the profits from the sale of the previous property will be higher than the price of the new purchase. Not to mention that, over time, this new home will be revalued by being located in a developing location.
How can you sell a house if you are still paying a mortgage?
In this case, the best thing to do is to sell first, cancel the debt and apply for a new mortgage loan to cover the purchase of the new house. If you have the necessary purchasing power, there is also the option of applying for a new mortgage and taking over both at the same time until the sale is completed. Another possibility is to take out what is called a “bridge mortgage”, a mortgage loan that allows you to move from one property to another without having sold the previous one and without the need for savings. Finally, there is the alternative of negotiating with the bank a subrogation, through which the mortgage of that property will be in the name of the new owner.
If you do not have a previous mortgage, what is better: to sell first or wait until you have found the new home?
The ideal is to be able to do everything at once. That is, finding the right buyer and finding the ideal home to buy, all at the same time. To achieve this, you can try to agree in the deposit contract the final closing of the sale within a certain period of time. It is recommended to request a period of 4 or 6 months, so you will have the peace of mind of having found a buyer and will have enough time to locate the right house and make some kind of reform if necessary. If this is not possible and you have enough savings to pay for the new purchase (i.e. 20% of the property price + 10% of the expenses), you can apply for a mortgage loan and, once the sale of the current property has been settled, settle the debt.
How to plan correctly the sale of the property?
The sale of a property requires organization. This includes factors such as: finding a good intermediary to help and advise during the process, carrying out possible reforms or repairs that help to revalue the property, gathering all the information and documentation that may be requested by interested parties (plans of the property, deed of the property, certificate of the community of owners, certificate of energy efficiency, certificate of Technical Inspection of the Building -ITE.-, habitability cell, last receipt of the IBI, certificate of outstanding balance of the mortgage or certificate of zero balance, last receipt of supplies …), taking good photographs of the house or correctly assessing the property.
How will the sale of the house affect the income tax return?
As this is a case of reinvestment of the habitual residence, since all or part of the money obtained from the sale of the habitual residence is used to buy a new home, you will be exempt from paying sales tax, provided that the total amount obtained from the transfer is reinvested in the purchase of the new property. If the amount reinvested in the purchase is less than that obtained in the sale, only the proportional part of the profit obtained that corresponds to the amount used for the purchase of the new home will be excluded from taxation.
What other expenses are involved in selling a property to buy another one?
Apart from the sales tax, there are other expenses that should be taken into account before starting the process: Municipal Capital Gains Tax (depends on each municipality and is calculated based on the increase in the value of the property during the time that you have been the owner of it), costs of the deed of sale when selling the property, costs arising from the possible settlement of the mortgage in progress, real estate commission (if applicable), costs resulting from the request for certificates or information relating to the home you want to sell. As for the expenses arising from the purchase of the new house, you must pay the tax of transmission of housing for the purchase (AJD, VAT or ITP), possible need to constitute a new mortgage, moving expenses or, if appropriate, carrying out reforms in the new housing.
In order not to make any mistakes during the process, it is best to consult a real estate expert who gives good advice and offers enough information to settle the sale and purchase successfully. This is especially important in those cases where there is an urgency to change the property.