What documentation or steps must be taken after signing a mortgage?
Necessary paperwork and documents after signing a mortgage
Everything is going smoothly. We have signed the mortgage and now we can relax a little. Now what? You might think this is the end of the line, but you still have some way to go: you now have a lot of new paperwork. Let's see what you have to do and what these steps will cost you:
- First, signing the public deed of sale. The deed of sale is usually signed at the same times as the mortgage loan. The financial institution will set the price; the notary’s fee is an amount set by the government, which will be 0.5% of the price of the property. We will have to take the original and the copies of the deeds.
- After that, we will have to settle the taxes. Luckily for us, the financial institution has to pay stamp duty (IAJD), which is usually the largest amount. but we will have to cover VAT (to the developer) if it is a new property (paying 10% of the property's value, and 4% if it is protected housing). If the property is used, we will have to pay Property Conveyance Tax (ITP), which will be between 6 to 10% depending on the autonomous community where the property is located. A lower rate is paid for this tax if the property is subsidised.
- Third, we will have to register the property in the Property registry of the municipality where the home is located. After all this, the property will officially be ours, and our rights as owners will be protected against possible hidden charges or previous tenants. The notary can carry out the procedure online, charging a stipulated fee of 0.2% of the value of the purchase. We can also ask an agency to do it (it will charge us the appropriate fee), or do it ourselves in person. We need to present a copy of the title deed, receipt of Property Conveyance Tax, and the form to pay the “Tax on the Increase in the Value of Urban Land” (known in Spain as the “plusvalía”).
- Next, we will have to change the title of ownership and register the new one in the Property Registry starting from two months after the deed has been signed. We will do so by filling in a form with the details of the property, the previous owner and the current owner. We must also attach a simple copy of the deed of sale. The notary usually carries out this step of the process.
- After that we will have to arrange to pay our utilities. Before buying a home, it is a good idea to estimate what appliances you are going to use in your new home, and also to make sure that the electrical installation conforms to prevailing regulations. Sometimes new home-owners are dismayed to find out that there are unpaid bills and, in the worst case scenario, the owner and user of the services will have to pay them when the outstanding consumption was generated, and we will not be able to register our contract until the debt has been settled. We will have to contact the licensed property administrator and inform them that we are the new owners, so we can be charged the property association owners’ fees.
- Last of all, we will have to take out a home insurance policy. As they have granted us the loan, the financial institution will also offer this product. Although we are under no obligation to take out this insurance with the same financial institution, usually it is a good idea to do so because it will reduce our monthly instalments.