A few weeks ago we published an article about the Taxes and expenditures when selling a house, now the turn is for those purchasing one. And as we wrote in that publishing, the main doubt that appears to both parts by the time of closing the deal. Also, this is something that independently is contemplated in the law, it is essential to detail it in the contract for avoiding controversies about it, in the most critical part of the process.
Well, in the following we are going to review which are those expenditures and taxes in a detailed way, that mainly are VAT or ITP -depending if the house is new or second hand-, IAJD, notary, land register and consultancy.
If the house that we are buying is new, we will have to pay VAT (Value Added-Tax) together with the price of the property to the constructor or seller. He is the one who liquidates the tax against the Treasury.
The rates applicable nowadays are:
- 10% generally.
- 4% in VPO (Social housing), for which requirements you can see in another article that we published a few days ago Requirements for accessing Social Housing
On the other hand, if the house that you want to buy is used, meaning, second hand; we will have to pay the ITP (Property Transfer Tax), which must be liquidated by the buyer in the correspondent Autonomous Treasury, depending where the property is.
Although the rate will be from different Autonomous Communities, in general terms it is between 6% and 10%. The amount to liquidate, is calculated through multiplying the price of the house by the rate applicable in any case.
There are reduced rates for people under 35 (3.5%), large families, etc. So it is important to get good advice, because this has to be declared to the notary the date of the conveyance, for accessing those benefits and deductions and avoiding later problems.
The IAJD (Document Duties and Registration Fees), must be payed each time that a notary document is signed if it is going to be registered in the Land Register, as it happens with conveyances and mortgages. Now again, it is a tax that is managed by the Autonomous Communities and it is liquidated through 600 Form, under an auto-liquidation format.
Regarding to the rate, it will vary depending on both the value registered and the Autonomous Community, although in general terms, it is fixed between 0.5% and 1.5% over the amount of the operation.
Also, there are reduced rates as for the ITP for large families or when any of its members are disabled, among others. Therefore, it is convenient once again to get informed before making this operation.
LAND REGISTER EXPENSES
On the other hand, it will be also necessary to inscription the mortgage in the Land Register, which cost will depend on the principal amount of the mortgage, which can reach up to 2,000 € depending on the case. Although, usually it is the same management service of the bank -as we will see in the last part-, who is in charge of this process. Certainly, they normally ask for a provision that can be around 1,200 € and 2,000 € to accomplish it.
The notary fees are going to depend on the agreement signed in the contract. The most common are those expenses “According to Law”, which means that the seller will pay around 60% of the notary costs, and the buyer will pay 40% for this concept. As an example, in a conveyance of 120,000 €, that 40% could be around 300 € or 400 €. This amount should be payed the same day that you go to the notary.
A consultancy is payed when we get a mortgage for buying the house, being this consultancy -normally appointed by the same bank-, which is in charged of liquidating all the taxes and necessary procedures- until the inscription of the deed in the correspondent Land Register. In this way, it will assure to the financial entity that the mortgaged property will have all legal requirements.
For that, normally they will ask for a provision of funds which, in addition of the necessary amount covered for those procedures, they will charge their fees. Only for giving an orientation, for a house of less than 200,000 €, that provision is around 1,200 € and 2,000 €. Once the inscription is done, they will give us the amount remaining back and all the supporting documents and invoices issued by the public administrations, notary and register.
Well, these are the expenditures and taxes that we are going to face by the time of buying a house, and the average is around 10%. So, it is recommendable always adding that percentage to the purchasing budget, with the purpose of having enough liquidity once the agreement is closed.
In addition, as we can see these procedures can be done by anyone who has time and a minimum knowledge on this matter. Nevertheless, knowing that it is not always like that, there are many agencies that will support you or even give you the chance to be in charge of those formalities, which is always the most recommendable choice. If not, you can always ask for this service from a professional.
For any doubt or clarification regarding to the information provided in this article, as always, I am available for anyone who needs advice.