Table of contents
- The property valuation fee
- Deeds of purchase: notary fees
- Inscription on the land registry
- Removal of the previous mortgage from the registry
- Legal fees
- Mortgage fees
- Property tax: iva (impuesto de valor añadido - vat)
- Taxes: itp (impuesto transmisiones patrimoniales)
- Stamp duty: ajd (impuesto de actos jurídicos documentados)
- Home insurance
- Utility transfer fees
- Spanish property management fees
For those planning on buying property in Spain, of utmost importance is an understanding of the expenses involved when investing in the Spanish property market. These may be considerably higher than you are used to in your own country, especially as regards government taxes.
Buyers often ask about the average cost of buying a house in Spain, but really there is no such thing. The reason is that the average fees for buying a house are mostly composed of taxes which depend on the value of the property, primarily.
Below, we will consider the principal costs buying property in Spain, many of which will depend on the purchase price - especially property tax. Property taxes in Spain add a considerable amount to the overall property buying costs, and the tax authorities in Spain enthusiastically ensure that the property price declared is not below market value to reduce how much tax is paid to the Spanish tax office. So, you should be extra-careful if a vendor suggests declaring a lower purchase price than the real purchase price paid.
It is convenient and logical to consider the property buying costs in Spain in line with the buying process, since when buying a property in Spain, each step generally increases the cost of buying. Also, if this is the first time that you are buying a property in Spain, this will introduce you to the process to follow when making a property purchase here.
1. The property valuation fee
The surveyors fees for buying a house in Spain is, to an extent controlled by law and varies according to the price of the property. The minimum amount chargeable for the carrying out of a valuation is €208 and will ultimately depend upon the following factors:
- Not all surveyors or survey companies charge the same
- The location of the property
- Will the surveyor need to charge expenses (mileage etc) to reach the property?
- Does the surveyor need to access technical information (plans etc)?
Ultimately, the financial institution will have to accept the surveyors report and so you will most likely use one recommended by them or by an independent surveyor like TINSA that is well known and has links with most of the financial institutions.
The Association of Professional Property Surveyors recommend a price of between €250 and €300 for a property valued at €120,000, and it increases according to the value of the property.
2. Deeds of purchase: notary fees
While it is perfectly legal to arrange for the transfer of a property in Spain via a private legal contract, this is not the typical way of doing so. From a practical point of view, no financial institution will offer a mortgage to facilitate the purchase without a public deed.
There is also always a risk of fraudulent behaviour if the public deed does not reflect your ownership of the property.
The process involves the drawing-up of the deeds of transfer by a public notary. A notary is an independent official who oversees the process and ensures that the proceedings take place according to the law and that the documentation is verified. Below is a table with approximate notary fees according to purchase price. Please note, your notary's fees may vary, and the cost must always be confirmed by the notary before proceeding:
3. Inscription on the land registry
Once the property has been transferred, it is advisable to register the new ownership details with the public property register. Apart from not being able to obtain a mortgage without doing so, failure to register can cause multiple problems in the future with regard to future property transfers, inheritances, defending title against third parties etc.
If you are buying land in Spain as opposed to simply a house or apartment, you can review some additional complexities in our article on how to buy Spanish property.
Below are approximate costs for having this carried out. It will be necessary to check specific prices with the individual land registry.
4. Removal of the previous mortgage from the registry
While not a legal requirement, it is preferable to have the previous mortgage removed from the property register. This is the case even though the mortgage has been paid off following the sale of the property. The charge will still appear on the register, and it’s removal incurs a number of charges, notably notary and registry charges.
The process involves obtaining a certificate from the financial institution that issued the mortgage, to the effect that the mortgage has been discharged. This certificate is then presented to the notary, who draws up a public deed to that effect. The deed is then presented to the registry for inscription on the property register, which thereby removes the mortgage charge from the property.
5. Legal fees
The fees for providing the legal assistance required for purchase or sale of a property in Spain, while they may vary from lawyer to lawyer, will typically average around 1% of the value of the property. This may vary if the value of the property is particularly high or low, but for most 'average' conveyances, the costs will be approximately 1%.
Also, the legal fees charged may rise if the lawyer is required to carry-out more work if a mortgage is used to purchase the property.
Bottom line, as in any other professional field, you will need to check with the individual lawyer and perhaps pay a dividend for any lawyer with a particularly good reputation.
6. Mortgage fees
If you are purchasing property in Spain with financing, you will of course face a number of costs involved in arranging a mortgage in Spain and include commissions charged by the financial institution involved as well as taxes to the government. The mortgage costs can be divided into two types: Finance Check and Opening Charge.
Finance Check The mortgage costs associated with checking into the applicant’s financial history to determine if they should qualify to receive the loan is a percentage over the total amount of the mortgage conceded. This is a one-off payment and may only be charged where the mortgage is issued.
Opening Charge Likewise there are costs involved in the arrangement of the mortgage. The administration expenses for a mortgage with a value below €150,000 usually include the charge for the finance check.
There also tends to be a charge for carrying out the relevant checks on the property registry so that the bank can ensure that the property that is being offered as security for the mortgage is free of all charges etc. All together, typically the banks will charge around 1% of the amount being lent for arranging the mortgage, and may well insist that you open a bank account with them.
It used to be that you could obtain mortgage expenses relief when submitting your annual income tax return in Spain. However, this form of income tax relief was removed some time ago. That said, as a result of the recent increase in interest rates across the world, including Spain, have forced the Spanish government to introduce income tax relief for the hardest hit Spanish taxpayers.
7. Property tax: iva (impuesto de valor añadido - vat)
Property transfer tax is separated into two parts. Sales tax is payable on a property purchase in Spain. However, depending on whether the property is new or resale, you will pay VAT or ITP purchase taxes. The purchase of a new property in Spain currently attracts a VAT rate of 10% of the property purchase price.
8. Taxes: itp (impuesto transmisiones patrimoniales)
The purchase of a resale property in Spain attracts ITP or transfer tax, which varies across Spain but is typically between 7% and 11% of the purchase price.
The reason the ITP rate on a resale property varies is that it is set by the regional rather than central government. So, if buying property in Barcelona, you can expect a ITP of 10% on properties with a value up to €1m and 11% above that. If buying property in Mallorca, however, a graded approach is taken, with an ITP of 8% applicable on properties up to €400k, while properties of over €2m attract a top rate of 13%.
Worth mentioning here is that you can reduce the amount of transfer tax that you pay by buying a house in Tenerife, where the standard rate is 6.5% of the purchase price, regardless of the value of the property.
9. Stamp duty: ajd (impuesto de actos jurídicos documentados)
The registering of property deeds upon purchasing a property in Spain as well as the creation of a mortgage in Spain both attract the AJD tax which requires the buyer to pay stamp duty.
These land registry fees are regulated by the local government, and so the rate of tax can vary across Spain. Typically, the stamp duty lies between 0.5% -1% of the value of the property on the deeds or the amount of the mortgage.
British buyers should note that while stamp duty is payable in the UK on a property purchase in the UK, this is really the equivalent of the VAT or ITP tax in Spain.
The stamp duty payable in Spain refers to the old-fashioned concept of a duty on the stamping of documents, which is probably where the stamp duty mentioned in the UK originates from, however the two should not be confused. In Spain stamp duty does exist, as well as a transfer tax. However, the latter is the much more expensive of the two.
For a full explanation on Spanish tax on property purchases, see: property taxes in Spain.
10. Home insurance
Once you have dealt with the transfer tax, stamp duty, legal fees, notary fees and mortgage arrangement costs (if required) you have covered the majority of the expenses related to buying Spanish property. However, it doesn't end there.
Often, the concession of a mortgage by a financial organization will come with a requirement to take out a home insurance policy recommended or managed by the same financial institution.
It is difficult to put an average price on such products as they may vary as to what exactly is covered by the insurance – structure, structure + contents, structure + contents + legal costs etc. The most that can be said is that it may be slightly cheaper than the UK equivalent, but broadly in the same range.
11. Utility transfer fees
In many regions of Spain, it is necessary for there to be a technical inspection of the property when the ownership of the property changes.
This is carried out by the local town hall and is to check that the property is safe to be connected to the mains utility services such as gas, electrical and water supplies. The local town hall will determine the specific regulations, but often if the property was inspected more than 5 years ago it will be required. The cost will also vary, but you can expect to pay from €250 to €350.
12. Spanish property management fees
Each Spanish property owner, by virtue of being an owner, and from the moment that, upon acquiring a home or commercial property in the relevant building or urbanisation the owner becomes part of the horizontal property regulations, the obligation to pay the common costs arises, “...it not being the case that failure to make use of any service provides exemption from the corresponding obligation,” (Article 9.2 Ley Propiedad Horizontal)
Therefore, the fact that a particular common service is not used, does not remove the obligation to pay for the supply of the service, for example, the use of a lift.
Accordingly, any individual decision, for example non-use of a Spanish property, does not relieve the owner of the obligation to pay their proportion of the property management fee in full. Likewise, where the service functions poorly, the obligation continues to exist, the correct response being to demand that the service functions as it should.
This list is not meant to be exhaustive, but rather to highlight the fact that the property conveyance process can be different in different countries.
For more information on complexities that can arise when making an investment in Spanish property, see: pitfalls of buying property in Spain.