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Key Expenses When Purchasing and Financing a Property in Spain

When you embark on the journey of purchasing a property in Spain and securing a mortgage, the bank will provide an estimate of the primary expenses and fees associated with your property transaction. Since the enactment of the new mortgage law in 2019, most of the mortgage-related costs are covered by the banks/lending institutions.

As a general guideline, we advise our clients to allocate approximately 10% to 14% of the property’s purchase price for the transaction-related expenses. This percentage encompasses the costs detailed below.

  1. Taxes and Stamp Duty
    • New build Properties: For newly constructed residential properties, Value Added Tax (VAT), known as IVA in Spain, is applicable. VAT typically stands at 10% of the property’s purchase price, but for commercial properties, plots of land, and garages, it rises to 21%.
    • Pre-Owned Properties: When purchasing a pre-owned property, you’ll be subject to Property Transfer Tax (ITP), or Impuesto de Transmisiones Patrimoniales. This tax varies between 6% and 11%, contingent on the property’s purchase price and location.
    • Additionally, there’s the Stamp Duty, or Impuesto sobre Actos Jurídicos Documentados, which ranges from 1% to 1.5% of the purchase price, depending on the region. It’s worth noting that, for the mortgage, the stamp duty is shouldered by the banks.
    • Please note, property tax in Spain does vary depending on the region/type of property and it is advisable to speak with a qualified/licensed tax adviser on this matter to be 100% sure – we would be happy to provide you with a recommendation to one of our trusted partners.
  2. Notary Fees and Registration Fees
    • The expenses related to notary and property registration are typically the responsibility of the property buyer and amount to a range between 0.10% and 0.50% of the property’s purchase price.
    • Conversely, for mortgage-related notary and registration fees, the costs are covered by the bank.
  3. Administration Fee
    • An administration fee is levied to handle tax payments and property registration in the land registry. Generally, this fee falls within the range of 300 to 700 euros for property purchases.
    • For mortgage-related transactions, the same administration fee applies, but it’s paid by the bank.
  4. Valuation / Appraisal
    • In Spain, a property valuation or appraisal, known as the “tasación,” is a standard requirement for mortgage purposes. These valuations are regulated by the Bank of Spain and conducted by professional surveyors to ensure the property’s eligibility for a mortgage. The cost of this valuation varies based on the property’s specifics, and the Mortgage Direct team can assist in coordinating the process.
  5. Bank Arrangement Fee
    • When securing a mortgage, some lenders charge an opening or arrangement fee for setting up the mortgage (bear in mind that banks cover other costs like taxes, notary fees, and registration expenses related to the mortgage). This fee generally ranges between 0% and 1.5% of the mortgage amount. In Spanish, this is known as “comisión de aperture”.
  6. Insurances
    • Depending on the bank, you may be required to take out insurances such as life insurance or home insurance. This may be a condition for mortgage approval or to secure a more favourable interest rate.
  7. Early Repayment Penalties
    • An early repayment penalty may be applicable if you decide to pay off part or the entirety of your mortgage during its term. Since June 2019, the new mortgage law specifies that early repayment penalties are only applicable if the bank incurs a loss during the cancellation. The maximum penalty is 0.25% for the first 3 years or 0.15% for the first 5 years and 0% afterwards with a variable rate mortgage. With a fixed interest rate, the maximum penalty is 2% for the first 10 years and 1.50% thereafter.

The Total Expenses for Acquiring a Property in Spain

The total expenses associated with purchasing a property in Spain vary according to the property’s purchase price. Following the 2019 mortgage law update, buyers bear most of the purchase costs, while the banks cover a significant portion of the mortgage-related expenses. 

If you can spare 5-10 minutes to fill out our short pre-approval form (please click this link), we will be able to provide you with an estimation of the total expenses associated with the purchase. Please bear in mind that these costs are only estimates and may fluctuate based on both the type of property and the property’s location within Spain.

Mortgage Direct

Since 2006, we have been using our expertise to help simplify, what can be, a complex Spanish mortgage and real estate buying process.

Our bi-lingual team of qualified Mortgage Direct advisers provide fantastic personalised advice on international property investments with exclusive mortgage conditions – making sure your money is safe as well as profitable!

If you have any questions about purchasing property in Spain or would like to discuss a tailor-made solution for yourself, then feel free to get in touch with me today.

Will Roberts Mortgage Adviser

Originally from the UK, Will has been based in Barcelona since 2019. He holds a diverse range of financial qualifications and has experience in numerous international roles in the financial sector, along with a managerial position in a FTSE 100 organisation. Fluent in English & Spanish.

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Mortgages taken out in currencies other than the currency in which you earn are considered Foreign Currency Mortgages. Changes in the exchange rate may therefore increase the equivalent value of your debt. Under the Mortgage Law 5/2019 banks in Spain have introduced mechanisms to protect consumers from exchange-rate risk. For more information, please speak to your broker.

Mortgage Direct, S.L. is a company registered in the Registro de Intermediarios de Crédito Inmobiliario del BdE with the nº D108.

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