When buying a property in Spain, the mortgage is not the only large expense. Buyers are faced with many other expenses and taxes in order to become owners.
Experts recommend having saved 10%-12% of the purchase price (depending on the autonomous community), for expenses such as the appraisal, the notary, the registration and taxes (VAT, Stamp Duty…). These are obligatory expenses involved with the purchase a property. The bill to be paid will depend on whether it is a new or second-hand property, and its price. Here we will summarise what each one consists of and the approximate price in 2019.
An expense to consider when buying a house, both new and second-hand, is the notary. Notary tariffs are regulated by the government and all charge the same services. In the case of granting the public deed of sale, the prices are between 600 and 875 euros, depending on the price of the property. For example, for a flat costing 100,000 euros approximately 850 euros would be paid, while for a flat costing 250,000 euros approximately 1,000 euros would be paid.
The Land Registry
Another expense is registering the deeds signed by the notary. The fees are fixed by regulation and depend on the price of the property, although they are usually between 400 and 650 euros.
Taxes linked to the sale and purchase
A buyer must also have extra savings to pay taxes, although the amount will depend on the price of the house and whether it is new or second-hand.
As for the expenses and tax on the purchase of a new home, the most important tax is VAT, which in 2019 amounts to 10%. For example, for a property costing 100,000 euros it would be 10,000 euros and for a 250,000 property it would be 25,000. However, in the Canary Islands a different tax is used, Canary Island Indirect General Tax (IGIC), amounting to 6.5%. In the case of public housing the VAT can be 4%, but it varies depending on the autonomous community and the type of social housing.
In addition to VAT, a second tax is the tax on Documented Legal Acts (IAJD). This tax is still paid by the buyer and will depend on each autonomous community.
On the other hand, for second-hand properties the most important tax is the Property Transfer Tax (ITP). In this case, the amount depends on the percentage applied to the deeded price and the autonomous community in which the house is located. In general, a rate between 6% and 10% is applied. However, for subsidised housing, large families and young people, there are usually reduced rates. For example, in Madrid, large families buying a private home will pay 4% ITP on the deeded price provided that the home purchased is the usual one.
Agency - an optional expense
The only optional cost of buying a home is that of the agency, the entity that the client can contract to process the settlement of taxes and other paperwork. They are private professionals, so there are no specific rates. They are usually contracted only when a mortgage is opened to acquire the property. Its approximate cost is 300 euros.
If the buyer is going to acquire the new or second-hand house by means of a mortgage loan, it would be necessary to add some additional expenses to those linked to the purchase and sale.
The appraisal of the house
If the buyer is going to apply for a mortgage, they will have to pay an appraiser to value the property and the bank will know what percentage of financing it can provide. In general, entities are lending an amount equivalent to 80% of the purchase price or appraisal value, although some are even financing 90-100% of the purchase price. In 2019, appraisal costs between 250 and 600 euros, depending on the entity carrying out the appraisal, the type of property and its valuation. The appraisal is valid for 6 months from the date of issue. Since the new Mortgage Law came into force in June 2019, the rest of the expenses are assumed by the bank, such as the notary, the registry and the AJD.
This commission can reach up to 2% of the loaned capital, as agreed with the financial institution. This amount is deducted directly from the money given to the mortgagee. However, there are many banks that do not apply this penalty.
Tax on Documented Legal Acts (IAJD)
This tax is paid whenever a notarial document is signed which must then be entered in the register with a monetary sum. Since November 2018, a decree law has been in force obliging banks to pay this tax thereafter.
Notary fees are those incurred by the granting of the public deed of the mortgage loan. This expense is assumed by the entity from June 2019.
The Property Registry
It also costs money to register the deeds signed by the notary. Again, the fees are fixed by regulation. This expense is assumed by the entity from June 2019.
The bank that grants the mortgage is the one that selects an agency to carry out the administrative work and to carry out all the proceedings. This expense has been assumed by the entity from June 2019. The agency must return the remaining money to the mortgage holder, and deliver the invoices and deeds after paying the costs of the notary and registry which your financial institution doesn’t assume. A further reminder that the AJD is paid by the bank.