The journey for the capital necessary to complete on your Spanish purchase has a few more steps than buying in the UK. Understanding this could save you significant sums when sending money to Spain, as well as save you headaches and last minute rushes which can sour the joy in buying a property in sunnier climes.
Unlike other countries, as Spain is in the EU it is seen as ‘low risk’. The financial system in Spain has evolved to accommodate one of the largest British expat populations in the world, so an industry of credible solicitors, estate agents and banks with a large international presence have been established for years.
Of course you must do your due diligence on who you are speaking with, but that is the same as sending money to anyone. Check that the company you are sending money to is a registered business; usually working with a solicitor recommended by the agent themselves is an easy solution for a trusting relationship.
As well as being diligent when it comes to sending your money to Spain, you should also consider where the funds relating to your transaction are being sent from.
It is generally safe to send funds abroad with UK banks. They will convert your Sterling and send your money abroad as instructed. There may be limits to the amount you can send at once, so I recommend checking ahead of time to avoid being caught out on any obstructive time delays.
Sending money to Spain: The drawbacks of using a bank
The key drawbacks, however, with using a bank is the exchange rate and the efficiency of the transfer.
Standard transfers can take 4-6 business days, and some may offer an additional charge for an express transfer which will fall into the more acceptable 1-2 day target mark.
Foreign exchange brokerages excel in both of these categories. Banks vary the rates they offer between commercial and retail customers, and using a brokerage allows you to reduce this gap. The difference of just 1 cent on the exchange rate on GBP/EUR can save hundreds, if not thousands of Pounds on a prospective transfer. With in-house teams that manage multiple large volume transfers also meaning that money can be in the recipient’s bank account the same or following day.
However, foreign exchange brokerages are not covered by The Financial Services Compensation Scheme should they go bust. This is not to say your funds are not protected, FCA Authorised Payment Institutions are required to safe-guard client funds as part of their regulatory requirements. Simply put, there are great benefits in using an FX broker over your normal bank, just do your due diligence and ensure the brokerage you’re in contact with is authorised by the FCA to ensure safe travels for your capital.
Foreign exchange brokerages are very much the norm now for anyone purchasing a property in Spain. You even see local offices with their representatives across the country. Recommendations from agents or friends are a great way to ensure you are engaging with a reputable company for the safety of your funds and your peace of mind.
How to send money to Spain
Finally, the journey. To buy a property in Spain you have to have opened a bank account first, and to do this you have to apply for an NIE number (Spanish tax ID number) and this can take up to two months. So keep this in mind for the timescale to completion.
In this period you will initially be requested to provide a reservation fee as part of the agreement to take the property off the market for 30 days. In this period the contract is drawn up, the deposit is then due, and a completion date for the property is arranged.
Funds should be sent through the solicitor, and there are a few ways they can reach the solicitor’s account, whether you use a bank or an FX company.
The funds can first be transferred to your account in Spain. From there you can then send the money via online banking or sending over a banker’s draft (effectively a cheque) to the solicitor. However, your bank in Spain may charge a reception fee for the funds, so I would check their terms and conditions ahead of time to avoid unnecessary costs.
The other route is to send the money directly to the Spanish solicitor from the UK, this carries less admin on your part and if you speak with the solicitor ahead of time, you may be able to avoid any reception fees involved in the money transfer.
My key advice would be to draw on the expertise of those who have been helping many in your situation to send money to Spain for years, to ensure you are transferring your funds safely and in a cost-effective manner.