The arras contract when buying with a mortgage in the Balearic Islands

In the Balearic Islands, 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.

The Balearic Islands, including Mallorca, Menorca, and Ibiza, offer a Mediterranean island lifestyle combining beaches, countryside, and historic towns. Buyers tend to include international investors, second-home owners, and those seeking a distinct island atmosphere different from mainland Spain, often drawn by the mix of natural landscapes and cultural heritage.

Airports on the main islands provide good seasonal and year-round connections, though flight frequency can vary outside summer. Property options range from traditional fincas and village houses to coastal villas and apartments, with demand and activity typically higher during the warmer months.

What follows are measured, dated figures for Illes Balears (province) — who lives there, what homes are advertised for, how to get there and the climate — each one sourced. They help you build a realistic picture of Illes Balears (province) as you work out the budget for a Spanish mortgage.

On 1 January 2025 the INE recorded 1,249,844 residents across the entire province of Illes Balears, 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. In the province of Illes Balears, 270,891 residents hold a foreign nationality, about 22 of every 100 people registered there. That is a significant but not dominant share, and it varies considerably from one town to another within the province.

INE's figures show 18,448 British nationals living in the province of Illes Balears as of 1 January 2025. That is a genuine presence, though not among the province's biggest foreign communities. Below are the main foreign nationalities registered in Illes Balears (province) as of 1 January 2025, taken from the figures INE publishes municipality by municipality.

A further table sets out nationalities not broken down above, among them Germans, Italians, Dutch, Belgians and Scandinavians, registered throughout Illes Balears province. Unlike that earlier table, this one uses data from 1 January 2022, the latest edition with full nationality detail.

Our data covers 4,468 homes for sale throughout the province of Illes Balears, with a median of €4,660/m² and a median ticket of €599,000. These numbers place the province above the €3,135/m² median of the 130 towns we track across Spain. Listings span a wide spread, but the middle half of the market sits between €3,400 and €6,740 per square metre, leaving room for both lower and higher asking prices.

On the median asking price in Illes Balears (province) of €599,000, transfer tax at the regional rate of 8 % comes to about €47,900, plus roughly €7,200 for notary, registry and gestoría fees. The total of about €55,100 must come from the buyer's own savings, not the mortgage. Bear in mind these are asking prices from adverts live on 2026-11-01, not the prices actually agreed. Negotiation sets the final figure, which depends on the home's condition, exact location and orientation.

The table below brings together the towns we track across Illes Balears (province), listing inhabitants, foreign residents per 100 people and median asking price per square metre, to show how much these markets differ.

In 05/2026, Illes Balears (province) had an estimated 21,304 tourist homes according to INE's experimental platform-based statistic, equivalent to 134,282 bed places and roughly 17 per 1,000 residents. The level is moderate, though letting a home to tourists still needs a regional licence.

In Illes Balears (province), the commercial airports are Aeropuerto de Palma de Mallorca (PMI), Aeropuerto de Ibiza (IBZ), Aeropuerto de Menorca (MAH). Availability of flights from your home airport varies by season, so comparing all of them before booking is sensible. The figures that follow reflect conditions in or around Palma de Mallorca, the provincial capital; elsewhere in the province, particularly inland, at altitude or on other islands, the climate can vary considerably. January's mean of 9.5 °C and minimum of 3.8 °C, compared with August's mean of 25.1 °C and maximum of 31.3 °C, describe a cool-mild winter. Heating is a real consideration, so it is worth asking about it when viewing any home. The area gets a moderate amount of rain, around 411 mm annually over about 51 days. The area records about 2,756 hours of sunshine a year. Source: the 1981-2010 climate normals published by AEMET, the state weather agency, for its Palma de Mallorca, Aeropuerto station, some 19 km from here; local conditions can differ, especially inland or at altitude.

In the twelve months to 07/2026, 13,774 homes changed hands in the province of Illes Balears, INE figures show. Such activity tends to bring more reference prices and a larger selection for anyone searching. These figures describe the province of Illes Balears as a whole and can change considerably from one town to another, and from one property to the next. Tell us what you are looking for and we will go through the numbers together.

The transfer tax on a resale home is set by each Spanish region. In the Balearic Islands the general rate is 8 %, 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 the Balearic Islands 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.