The arras contract when buying with a mortgage in Castellón

In Castellón, as anywhere in Spain, the first document a non-resident buyer usually signs is not the mortgage deed but a private reservation contract, known as the arras. It commits both sides to the sale, fixes the price and sets a date for completion at the notary, and it normally requires a deposit to be paid on signing.

For a buyer who still needs a Spanish mortgage to complete, the question is simple but important: what happens to that deposit if the bank's answer, once the file is studied, is not the one you hoped for? The answer depends almost entirely on how the arras contract is worded before you sign it.

Castellón province lies along the northern Costa del Azahar, offering a coastline with towns such as Peñíscola alongside inland mountainous areas. It tends to appeal to buyers seeking a quieter, less developed coastal environment compared to areas further south, including those interested in traditional Spanish towns and countryside.

The region is generally accessed via Valencia or Castellón airports, with more limited direct international flight options than larger hubs. Property types include coastal apartments, traditional village houses, and rural fincas, with activity increasing during the summer tourist season.

Before you commit to the numbers of a mortgage, it helps to know the place: dated figures on population, asking prices, transport links and climate in Castellón (province), each with its source. Together they give a grounded sense of Castellón (province) to weigh against your budget.

On 1 January 2025 the INE recorded 627,620 residents across the entire province of Castellón, a figure that includes every municipality, not just the capital that shares its name. These official population data set the context for the local market figures below. Foreign nationals make up 118,810 residents of the province of Castellón, roughly 19 per 100 inhabitants. The figure is meaningful without being overwhelming, and it shifts noticeably depending on which town in the province you look at.

On 1 January 2025, the province of Castellón had just 1,423 British nationals on its register, a modest figure. Because registration only counts year-round residents, it leaves out second-home owners who spend part of the year in the province. Below are the main foreign nationalities registered in Castellón (province) as of 1 January 2025, taken from the figures INE publishes municipality by municipality.

For nationalities the census groups together rather than listing them individually, such as Germans, Italians, Dutch, Belgians or Scandinavians, we turn to the detailed INE register for Castellón province. Unlike the table above, this count dates from 1 January 2022, the most recent detailed edition.

In our own price bank, the 3,955 homes currently advertised for sale across the province of Castellón show a median asking price of €1,740/m² and a median ticket of €179,000. Both sit below the €3,135/m² median across the 130 towns we track across Spain, making the province one of the more affordable among them. Prices vary considerably from one listing to the next, though the bulk of the market, its middle half, falls between €1,230 and €2,370 per square metre.

In Castellón (province), the regional transfer tax rate of 9 % applied to the median asking price of €179,000 gives a tax bill of about €16,100, plus roughly €2,100 for notary, registry and gestoría charges. That puts the total near €18,300, money the mortgage will not cover. The figures reflect asking prices in listings live on 2026-11-01, rather than prices actually paid. Final amounts are agreed through negotiation and vary with the state, location and orientation of each property.

This table sets out population, foreign residents per 100 people and median price per square metre for the towns we track in Castellón (province), highlighting how much local markets can vary.

INE's experimental statistic, based on listings from the main holiday-rental platforms, counted 6,990 holiday-let homes in Castellón (province) in 05/2026 (37,362 bed places), about 11 per 1,000 residents. That is a moderate presence, and tourist letting still requires a regional licence.

The only commercial airport within the province of Castellón is Aeropuerto de Castellón (CDT), so it is worth checking in advance whether it operates in the season you plan to travel, since schedules can vary through the year. The figures that follow reflect conditions in or around Castellón de la Plana, the provincial capital; elsewhere in the province, particularly inland, at altitude or on other islands, the climate can vary considerably. With January averaging 10.6 °C and overnight lows around 5.8 °C, against an August mean of 25.6 °C and highs near 30.3 °C, winters are mild rather than warm. Checking the heating in any home is a sensible step. Annual rainfall sits around 467 mm, falling on roughly 46 days, neither particularly dry nor wet. Annual sunshine here runs to around 2,755 hours. These figures are the official climate normals (1981-2010) from AEMET, Spain's state weather agency, at its Castelló - Almassora station, about 4 km away; conditions at the exact property can differ slightly, especially inland or at altitude.

The province of Castellón saw 14,098 registered home sales in the year to 07/2026, per INE. A busier market like this generally offers more comparable transactions and greater choice. Bear in mind that these numbers reflect the province of Castellón overall; they shift a great deal between towns and between individual properties. Let us know what you have in mind so we can look at your case.

The transfer tax on a resale home is set by each Spanish region. In Castellón the general rate is 9 %, and on top of it come notary, land registry and gestoría (roughly one more percent). On a new build you pay 10 % VAT plus stamp duty instead of the transfer tax. This money is not lent by the bank.

The arras is a private contract between buyer and seller, agreed before the notary and before the bank hands over any funds. It usually names the agreed price, the completion date, and the deposit paid as a down payment on account of that price. Spanish law recognises more than one kind of arras: penitenciales, which allow either party to withdraw under agreed penalties, and confirmatorias, which bind both sides more tightly and leave less room to walk away. The wording matters as much as the amount.

For a buyer who is financing the purchase with a Spanish mortgage, the arras should never be treated as a formality. Once it is signed, the deposit is at stake, and the seller will expect you to complete within the agreed weeks, whether or not your mortgage has been approved by then.

The safest structure for a non-resident buyer is an arras contract that includes a suspensive condition: the sale, and the loss of the deposit, apply only if the buyer fails to complete for reasons other than a lender's decision on the loan. In practice this means the contract states plainly that completion is subject to the buyer obtaining mortgage approval within a stated period, and that if no Spanish bank approves the loan on reasonable terms within that period, the buyer can withdraw and recover the deposit.

Without that clause, a buyer who signs the arras before any bank has reviewed the file is taking on the seller's risk as well as their own. If the loan does not come through in time, the seller can usually keep the deposit under a standard penitential arras, even though the buyer did nothing wrong beyond trusting that financing would arrive. This is why we recommend starting the mortgage study in Castellón before, or at the very latest alongside, the negotiation of the arras text.

Once the mortgage is approved and the arras deposit is applied to the price at the notary, the obligations do not end. As a non-resident owner you will file an annual Modelo 210 tax return in Spain, and because Spain and the United Kingdom have a double taxation agreement, a tax adviser can confirm how any Spanish rental income or future gain should also be reported to HMRC. If you ever sell, the buyer will withhold 3% of the price against your Spanish tax bill.

Because you are paying in euros from a sterling income, it is also worth tracking the exchange rate between signing the arras and completing at the notary; a shift in GBP/EUR between those dates can change what the deposit and the final payment actually cost you.

Spain is a relatively short flight away from most UK airports, making regular visits to a Spanish property straightforward for owners based in Britain. Many British buyers are drawn to Spain for its climate, coastal lifestyle and established expatriate communities. One practical point to bear in mind is that Spanish inheritance law differs from UK rules, so it is worth taking specific advice on how it may affect the property and one's estate. Currency movements between sterling and the euro can also affect the overall cost of purchase and ongoing expenses.

Spain and the United Kingdom have a double taxation agreement in place, and a local tax adviser should confirm how rental income or gains from Spanish property must be declared and reported to HMRC.

As the United Kingdom is no longer an EU member state, British citizens may stay in Spain for up to 90 days in any 180-day period without a visa, and must apply for a visa or residence permit for longer stays.

Since the United Kingdom uses the pound sterling (GBP) rather than the euro, buyers should factor in exchange-rate movements and currency conversion costs when paying for a property or transferring funds to Spain.