REAL ESTATE – FINANCING – What are the expenses of a mortgage in Spain and who is in charge of paying them?

What are the expenses of a mortgage in Spain and who is in charge of paying them?

The new Mortgage Law has clarified who must take care of each expense when contracting a mortgage to buy a home. Knowing this information helps the buyer to know the real cost of the operation

Buying a home involves many more expenses in addition to the price that is agreed with the seller. Therefore, it must be taken into account that, in the final amount that will have to be paid, it is necessary to add taxes, administrative expenses (such as those of the notary’s office), as well as those derived from the mortgage, among which there are the commissions agreed with the bank and the appraisal of the home.

As a general rule, banks grant a maximum of 80% of the appraisal that is carried out. That is to say, that, at least, it is necessary to have saved 20% of the price of the house for the sale and purchase operation to be feasible, to which an additional 10% and 15% must be added to face the different expenses cited above.

The expenses of a mortgage

The contracting of a mortgage carries implicit expenses that the financial institution charges the home buyer for lending them the money to finance the operation. These expenses are:

• The mortgage loan opening commission.
• Linked products that can be used to discount the interest rate of the mortgage, such as life or home insurance.
• The mortgage cancellation costs, which, if not specified otherwise in the contract, are borne by the applicant.

Who pays the expenses of taking out a mortgage?

In addition to the previously mentioned expenses, there are others of an administrative nature that must be faced by the buyer, but also by the bank. The Mortgage Law clarifies who has to take care of paying each one of them.

The client is obliged to take charge of:

• Appraisal expenses
• The notary fees that apply, for example, if you want a copy of the mortgage deed

The financial institution will bear the costs of:

• The agency
• The notary
• The tax on documented legal acts (AJD) related to the signing of the mortgage

Non-mortgage related expenses

You have to differentiate between these expenses if it is a new home or a second-hand one. In the case of the first, two types of taxes have to be paid: value added tax (VAT), which is 10% on the final sale price; and the AJD regarding the signing of the deed of sale, which differs according to each autonomous community, although it does not usually exceed 1% of the value of the house. For second-hand properties, you only have to pay the property transfer tax (ITP), which also varies from region to region.

In addition, you have to pay another series of expenses (together with those of agency and notary’s office), among which those of the Property Registry of the deed of sale and the so-called Nota Simple, which verifies the ownership and charges of the property, stand out. 

Recommendations before requesting a mortgage

Taking into account all the expenses involved in buying a home, beyond the price of the property, it is appropriate before applying for a mortgage to take into account the following elements from a financial point of view:

• Have a prior financial cushion of 20%, which must be increased to 30% to be able to respond to all the expenses associated with the operation.
• Comply with the requirements requested by the bank prior to accepting the mortgage loan, mainly in relation to the level of income.
• Analyze if the personal financial situation is stable and if it seems that it will be like that in the future, since the economic commitment with a mortgage is long-term.
• Value resorting to a professional advisor, who will be able to advise what is best according to each particular economic situation, and will answer any questions that arise throughout the process.

The mortgage is a very important decision when buying a home. As experts in the real estate sector and, above all, as buyer agents that we are, our advice is that you always let yourself be advised by professionals who know which mortgage is best for each person.

Marbella WOHNEN Immobilien

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