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Once your application has been reviewed and approved, you will be able to sign the mortgage contract and the deed before a notary.
What are the main costs of a mortgage and a property sale transaction?
Valuation is the first and indispensable step when granting a mortgage. A professional appraises the property to determine the real value of the mortgage security. To calculate the maximum amount you can borrow, the usual figure is 80% of the valuation or the lower of the two - i.e. the valuation or the purchase price. The cost of the transaction is borne by the buyer and varies depending on the type of property and its surface area.
These are the notary's fees for notarising the sale transaction. The notary's job is to check that the contract is legal, explain the clauses to both parties and notarise the public deed. Whereas the notary costs in respect of the mortgage are borne by the bank, the fees with regard to the deed of sale are borne by the buyer.
Once the deed has been signed before a notary, the property needs to be registered in the new owner's name in the Property Registry. This step ensures the legal certainty of the purchase vis-a-vis third parties. As in the case of the notary, the mortgage registration costs are borne by the bank, while the registration of the deed of sale must be paid by the customer.
The management consultancy carries out all the paperwork after the signing: the payment of the relevant taxes and the registration of documents. In the case of the property sale, this service is paid for by the buyer to ensure that all the documentation is duly processed.
The purchase of a brand-new home is taxable for VAT, which is currently 10% in most cases (or 4% if the property comes under a special social housing scheme). In addition, the buyer must pay stamp duty (AJD), which is a tax levied by the autonomous regional community and which varies from 0.5% to 1.5% depending on the location of the property.
If you buy a pre-owned home, you don't pay VAT, but instead the Property Transfer Tax (ITP, in its Spanish initials). Each Autonomous Community manages and collects this tax directly, so the rate may vary significantly (generally between 6% and 10%). There are reduced rates in many regions for specific groups, such as young people, large families (3 or more children) or people with disabilities.
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We answer your most frequently asked questions
What is the difference between mortgage costs and sale transaction costs?
They are often confused, but they are different things. Mortgage costs are those that arise from the granting of the loan (valuation and arrangement fee, if any), which these days the bank bears almost entirely. On the other hand, the sale transaction costs are the ones that you pay for the change in ownership of the property (notary fees, registry, management consultancy fees, stamp duty or VAT).
How does each autonomous community (i.e. regional government) influence the calculation of my taxes?
The location of your future home determines your final budget. Although the rate VAT on the sale of new properties is the same everywhere in Spain (10%), taxes such as ITP [Property Transfer Tax] (for pre-owned properties) and AJD [stamp duty] (for new properties) are devolved to the Autonomous Communities. This means that, depending on where you buy, the rate of tax may vary significantly, generally from 6% to 10% for the ITP.
Can I include the conveyance and valuation costs in the mortgage loan?
As a general rule, the amount you borrow can be at most 80% of the valuation or purchase price (the lower of the two). This means that the conveyancing, taxes and valuation costs must be paid with your savings. This is what is known as the "down payment" ("entrada" in Spanish) for the property, which is usually around 20% of the property price plus 10-12% to cover these costs and taxes.
Are there rebates on ITP for young people or large families?
Yes, most of the Autonomous Communities offer reduced ITP rates to help them afford a home. These rebates usually apply to people under the age of 35, large families, people with disabilities or if the property is in a rural area.
How long does the management consultancy take to register the property with the Property Registry?
The full process usually takes between one and three months. After signing in the presence of a notary, the management consultancy must pay the relevant taxes within a maximum of 30 days. Once they have been paid, the deed is filed with the Property Registry, which has 15 working days to assess and register the document.