Mortgage expenses for a new home
Are you going to buy a property? Congratulations; we are sure it will be a good decision. Now you have taken this all-important step, you may have a lot of questions, and the most important one is usually: What expenses will I have to pay on my mortgage? Don't worry: we will explain everything here, as clearly as we can and without being too long-winded.
First of all, these will not be the only expenses you have to pay: to formally record the sale we will have to pay other taxes and charges; the appraisal, the notary's fees, value-added tax, property conveyance tax. These charges, however, are now more balanced, as stipulated in the Mortgages Act (before, the buyer had to pay almost all of them).
Even so, it is still a good idea to have a good amount of money saved. As a rough guide, the remainder should cover 10 to 15% of the price of the property, although this will depend on whether the property is new or used, and also on the autonomous community in which it is located.
Let’s look at these charges more closely.
First of all, we have the charges for buying the property:
- We will have to pay the notary’s fees regardless of whether the property is new or used. Notary fees are regulated by law, so everybody is charged the same across the board. You will be charged approximately €600 to €1,000 for the transaction, depending on the price of the property. Other items, such as the earnest money agreement, and the number of copies of the deed, must also be taken into account.
- We have to pay Property registry charges for registering the documents signed by the notary there. These charges, of between €400 and €650, are also fixed by the government, though they vary depending on the price of the property and if the extract from the property registry is included. The charges may be higher if we get an agency to complete this step of the process. Basically, they can never be higher than 1% of the price of the property.
- We also have to add the taxes on the transaction. In general, they all depend on the autonomous community where the property is located, and also on the price of the property which appears in the deeds.
- First of all, VAT, which, if the property is new, is 10% (in the Canary Islands, however, General Indirect Canary Islands Tax is 6.5%). If it is a public or subsidised property, VAT of 4% will be payable.
- If our property is used, then we will pay the property conveyance tax (or ITP), instead. It will vary depending on the registered price, and also on the autonomous community. Property conveyance tax is usually between 6% and 10%, and lower for subsidised housing, and homes which will be used by large families or young people.
- We will only have to pay Stamp Duty (or IAJD), if we are taking out a mortgage on a new property. It will be charged on the signing and the registration of the deeds. Its exact amount will depend on each autonomous community; but the buyer will always pay it in each case.
- The agency. This is the only charge that we can avert paying, but if we do so we will have to pay the taxes and do the paperwork ourselves. Each agency has its own fee, though it usually comes out at about €300.
Now let’s look at the mortgage expenses:
First, we must have the property we want to buy appraised. The bank will use this figure to calculate the amount of the loan (usually about 80% of the appraisal value). In 2021, appraisals cost between €250 and €600, and they are valid for six months from their issue date.
Now the good news: as we said earlier, because of the Mortgage Act, the financial institution now has to pay the following:
- The arrangement fee, which the bank charges for granting us the loan. It may be up to 2% of the loan. Many financial institutions do not charge it, however.
- Stamp duty (IAJD), which is paid when any notarial document is registered in the registry.
- And also notary's and agency's fees, and the charge for registering the document in the Property Registry.