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 in order to formalize the operation and become the owner of the property.
Between the valuation of the house, the notary, the registry, and the corresponding taxes (VAT, ITP…), experts recommend saving between 10% and 12%, depending on the Autonomous Region, of the price of the property. All of these are compulsory expenses that revolve around the purchase and sale of a property, although the ‘bill’ to be paid will depend on whether it is a new or used home and the amount of the property. We summarise what each one consists of and what their approximate price will be in 2022, as well as one of the great fiscal novelties of this year: the entry into force of the new reference value of the Cadastre, and which is the taxable base of the ITP, the tax that is applied on the purchase of used properties.
The costs of the sale and purchase
The notary’s office
One expense to take into account when buying a house, whether new or used, is the notary’s fees. Notary fees, known as tariffs, are regulated by the state and all notaries charge the same for the same services. In the case of the execution of 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 of 100,000 euros you would pay approximately 850 euros, while for a flat of 250,000 euros, you would have to pay approximately 1,000 euros.
The Land Registry
It also costs money to register the deeds that have been signed by the notary. Again, the fees are fixed by law and depend directly on the price of the property but are usually between 400 and 650 euros.
Taxes linked to the sale and purchase
The buyer of the property must also have an extra cushion to pay taxes, although the amount will depend on the price of the house and whether it is new or second-hand.
In terms of expenses and taxes on the purchase of a new home, the most important tax is VAT, which in 2022 amounts to 10%. That is to say, it would be 10,000 euros in the case of a house of 100,000 euros and 25,000 in the case of a house of 250,000 euros. But in the Canary Islands, it is 6.5% (IGIC – Impuesto General Indirecto Canario). In the case of public housing, VAT maybe 4%, but this varies depending on the Autonomous Community and the type of social housing in question.
A second tax must be added to the VAT: the stamp duty (IAJD). This tax is still paid by the buyer and will depend on each Autonomous Community.
On the other hand, for used 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, although as a general rule, a rate of between 6% and 10% is applied. These rates are currently applied: It should be noted that for VPO, large families, people with disabilities, and young people there are usually lower rates. For example, in Madrid, large families buying a freehold property will pay 4% ITP on the deeded price, as long as the property they buy is their habitual residence.
Special conditions have also come into force in Andalusia. From 1 January 2022, a 6% ITP will be applied to the sale and purchase of homes destined for permanent residence with a value of up to 150,000 euros (one point below the standard rate). In addition, when the buyer is under 35 years of age, a victim of domestic violence, or a victim of terrorism, the ITP to be applied increases to 3.5%. This same rate also applies to the sale and purchase of homes located in unpopulated areas of the region, as well as to people with disabilities who buy homes with a value of up to 250,000 euros.
The agency, an optional expense
The only optional cost of buying or selling a property is that of the gestoría, the entity that the client can hire to process the payment of taxes and other paperwork. They are free professionals, so in this case, there are no specific fees, and they are usually only contracted when a mortgage is taken out to purchase the property. Their approximate cost is 300 euros.
The costs of the mortgage
If the buyer is going to acquire the new or used property by means of a mortgage loan, some additional costs must be added to those linked to the sale and purchase.
The valuation of the house
If the buyer is going to apply for a mortgage, he will have to pay an appraiser to value the property and the bank will know what percentage of financing can be granted. In general, banks are lending an amount equivalent to 80% of the purchase price or the appraisal value, although some are financing 90-100% of the purchase price, usually taking the lower of the two. In 2022, the appraisal costs between 250 and 600 euros, depending on the entity performing 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’s office, the registry, and the AJD.
Arrangement fee
This commission can be up to 2% of the capital loaned, depending on what has been agreed with the financial entity. And this amount is deducted directly from the money given to the mortgagor. However, there are many banks that do not apply this penalty.
IAJD (Tax on Documented Legal Acts)
This tax is paid whenever a notarial document is signed, which must then be registered in the registry and with an economic amount. Since November 2018, a decree law has been in force which makes it compulsory for banks to pay this tax from then on.
Notary’s office
Notary fees are the costs incurred for the execution of the public deed of the mortgage loan. This expense is assumed by the entity from June 2019.
The Land Registry
It also costs money to register the deeds signed by the notary. Again, the fees are fixed by regulation. This cost is assumed by the entity from June 2019.
The agency
The bank that grants us the mortgage is the one that selects an agency to carry out the administrative work and to carry out all the procedures. This cost is assumed by the entity from June 2019. The agency must return the surplus money to the mortgagor and give him/her the invoices and the deeds after paying the notary and registry fees that are not assumed by the financial entity. We remind you once again that the AJD is paid by the bank.
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