Let's look at these costs in detail:
Mortgage arrangement costs:
The new developments in the 2019 Mortgage Law include its special protection for consumers and the fairer distribution of mortgage costs, of which there are quite a lot:
- Appraisal costs, which range between €200 and €500. Through the appraisal, the bank values the home so it can determine how much it is willing to lend you. This is mandatory, although the buyer chooses the appraiser.
- Notary costs, to witness the deeds for the loan and the lender. These costs are set by law. They may be around €650 for a €100,000 loan.
- Registry fees, for entry of the mortgage deed in the land registry. These are also set by the government. For example, the cost of a €100,000 mortgage could be €170.
- Management costs, these comprise the management company's fees for settling taxes, for example. Although these depend on the management company involved, they are usually between €150 and €300.
- Mortgage tax or stamp duty (IAJD). This is set by the autonomous communities and is between 0.5% and 1.5% of the amount borrowed, interest and other costs.
You also need to consider all other mortgage costs, such as the arrangement fee (this is not regulated, but is usually not more than 1%, and many do not actually apply it). The early repayment fees depend on each mortgage, although these do have a legal cap. For variable-rate mortgages, this is a maximum of 0.15% for the first five years, or 0.25% during the first three. For fixed-rate mortgages, the maximum is 2% for the first ten years and 1.5% from the eleventh year; subrogation costs arise when mortgages are changed from one financial institution to another, or when the owner of the mortgage is changed. The first of these cases is the most common, and involves a subrogation fee and an arrangement fee, in addition to the appraisal costs charged by the new entity. These costs depend on the purpose of the subrogation, the date the mortgage was arranged and the regulations in force at that time, and the subrogation fees charged by each bank. The costs of extending a mortgage (whether the term or the amount, or both) vary, but are always less than the costs of applying for a new mortgage. There are also novation costs, which arise when we change any of the clauses in our mortgage agreement.
In addition to the costs of taking out a mortgage, you also have ways to reduce them. For example, you can do this by arranging additional products and services (or linked or combined products). Although these are not mandatory, they enable lower interest rates on the mortgage in exchange for being linked to the bank.
How are mortgage expenses distributed?
We have seen that the Mortgage Law introduced a fairer distribution of costs. Banks are now responsible for:
- Management fees
- Stamp duty (IAJD) and its own copy of the deed
And consumers are responsible for:
- Their copy of the deed.