Expenses and sales tax with or without mortgage

The mortgage is not the only major expense involved in buying a home. In fact, there are many expenses and taxes that must be faced to formalize the operation and become the owner of the property.

Between the appraisal of the house, the notary, the registration and the corresponding taxes (VAT, ITP …), experts recommend having savings of between 10% and 12%, depending on the CCAA, on the price of the house. All of them are mandatory expenses that revolve around the sale of a home, although the ‘invoice’ to be paid will depend on whether it is a new or used house and the amount of the same.

The expenses of the sale

I would notice
An expense to consider when buying a house, both new and used, is the notary. Notaries’ fees, called tariffs, are regulated by the State and all charge the same for identical services. In the case of the granting of the public deed of sale, the prices are between 600 and 875 euros, depending on the price of the property. For example, for an apartment of 100,000 euros approximately 850 euros would be paid, while for one of 250,000 euros about 1,000 euros should be paid.

The property registration
It also costs money to register the deeds signed by the notary. Again, the fees are fixed by regulations and depend directly on the price of the property, although they are usually between 400 and 650 euros.

Taxes linked to the sale
The homebuyer must also have an extra mattress to pay taxes, although the amount will depend on the price of the house and whether it is new or used.

As for the expenses and tax in the purchase of a new home, the most important tax is VAT, which in 2019 amounts to 10%. That is, it would mean 10,000 euros in the case of a house of 100,000 euros and 25,000 in a house of 250,000 euros. In the Balearic Islands it is 8%, but in the Canary Islands, it is 6.5% (it is the IGIC-Indirect General Canary Tax) ) .In the case of public housing VAT may be 4%, but it varies depending on the Autonomous Community and the type of social housing in question.

A second tax must be added to VAT: that of Documented Legal Acts (IAJD). This tax is still paid by the buyer and will depend on each Autonomous Community.

On the other hand, for the homes used, the most important tax is the Property Transfer Tax (ITP). In this case, the amount depends on the percentage that is applied on the deed price and the autonomous community in which the house is located, although as a general rule a rate of between 6% and 10% is applied. However, for VPO, large families and young people often have reduced rates. For example, in Madrid, large families who buy a free home will pay 4% of ITP on the deed price, provided that the home purchased is the usual one.

It should be noted that for VPO, large families, people with disabilities and young people there are usually smaller types. For example, in Madrid, large families that buy a free home will pay 4% of ITP on the deed price, provided that the home purchased is the usual one.

The agency, an optional expense
The only optional cost of buying and selling a home is that of the agency, the entity that the client can hire to process the settlement of taxes and perform other paperwork. They are free professionals, so in this case there are no specific rates, and they are usually hired only when a mortgage is opened to acquire the property. Its approximate cost is 300 euros.

The mortgage expenses

If the buyer is going to acquire new or used housing through a mortgage loan, some additional expenses would have to be added to those related to the sale.

The appraisal of the house
If the buyer is going to apply for a mortgage, he must pay an appraiser to value the property and the bank knows what percentage of financing it can grant. In general, entities are lending an amount equivalent to 80% of the purchase price or of the appraised value, although some are getting to finance 90-100% of the purchase price, usually paying attention to the lowest. In 2019, the appraisal costs between 250 and 600 euros, depending on the entity that makes the appraisal, the type of property and its valuation.

The appraisal is valid for 6 months from the date of issue

Since the entry into force of the new Mortgage Law in June 2019, the rest of the expenses are assumed by the bank: such as the notary, the registry and the AJD.

Opening commission
This commission can reach up to 2% of the borrowed capital, as agreed with the financial institution. And this amount is deducted directly from the money delivered to the mortgaged. However, there are many banks that do not apply this penalty.

IAJD (Documented Legal Act Tax)
This tax is paid whenever a notarized document is signed and then must be registered in the registry and with an economic amount. Since November 2018, a decree law has come into force that requires banks to pay this tax thereafter.

I would notice
Notary expenses are those produced by the granting of the public deed of the mortgage loan. This expense is assumed by the entity since June 2019.

The property registration
It also costs money to register the deeds signed by the notary. Again, the fees are set by regulations. This expense is assumed by the entity since June 2019.

The agency
The bank that grants us the mortgage is the one who selects an agency to carry out the administrative work and carry out all the procedures. This expense is assumed by the entity since June 2019. And it is that the agency must return the remaining money to the mortgaged and deliver the invoices and deeds after paying the notary and registration expenses not assumed by its financial entity. We remind you again that the AJD is paid by the bank.