Who covers the expenses when a mortgage is constituted in Spain?
Saying that 2018 has been a turbulent year for the Spanish mortgage market would be an understatement.
There have been several judgments passed against some of the big players…
A Royal Decree is currently “interfering” with it and…
A new Mortgage Law is being processed…
And just you wait and see!
This is by far the end of the turmoil!
At the beginning of the year, the Supreme Court ruled that notarial expenses were to be paid by banking entities.
But then the same judicial body ruled that the taxes derived from the purchase would be paid by the buyer, which led the Government to approve a Royal Decree that dictates that the banks should take care of them from now on.
To avoid further confusion in this regard, the different political forces agreed – in the Council of Ministers held on November 8 – upon the processing of the future Mortgage Law.
It all seems to indicate that under this new Law the expenses will be paid by financial institutions, except for appraisal costs which, will be borne by the customers.
Expenses you´ll incur before being granted a Spanish mortgage
Appraisal (Tasación)
Your financial institution will carry out an appraisal of the home that is to be mortgaged which, helps to determine the real value of the property.
This valuation is mandatory by law and must be conducted by an appraisal entity registered with the Bank of Spain.
It will cost you between 300-500€, depending on the entity and the final value of the property
Extract of relevant information (Nota Simple)
Your financial institution will request a Nota Simple from the Land Registry to verify all possible data (ownership, state of charges, description, limitations, etc.) on the property that is intended to be mortgaged.
This procedure is usually done by the bank’s management and its cost around 30 euros, but it varies depending on the entity.
Expenses you incur once the Spanish mortgage has been granted
Formalisation fee (Comisión de Apertura)
This is the commission that the bank charges to the client for the granting of the mortgage and can reach up to 2% of the property’s value.
Notarial fee (Arancel Notarial)
The notary expenses are generated by the granting of the public deed of the mortgage loan.
The notarial fee is what the notary charges for his or her work and it will now be paid by the bank.
Notarial fees are set by law and take into account two factors: the value of the transaction and the number of pages of the deed.
The notaries apply a fixed tariff established by the government in 1989, so all notaries in Spain charge the same for the same service in Spain.
They can only give you a 10% discount, so the competition between them is only based on quality.
Registry (Registro)
Like in the case of notaries, the fees of the property registrars are set by law and will also be paid by the bank. They depend on the value of the property, but the cost is usually around 400 euros.
Stamp Duties (Actos Jurdídicos Documentados)
Although The Supreme Court decided that the client was to pay for these documents, the government put the burden on the banks and imposed by law that these institutions were to pay for them.
It is charged by the Administration for legal acts that have to be registered in notarial, mercantile or administrative documents.
The applicable tax rate will be determined by each Autonomous Community, but it’s generally about 0.5% – 1.5% on the sale price.
Processing Agency (Gestoría)
In most cases the bank tasks all the paperwork of a mortgage to a “gestor”. He or she who generally requests for a deposit of all expenses which, he then justifies to his/her clients.
Taxes (Impuestos)
In addition to the Documented Duties (AJD) tax, you´ll be taxed a 10% VAT if you´re purchasing a new house, or the tax on property transfers (ITP) that is applied to second hand homes.
The ITP can vary between 6% and 10% depending on the Autonomous Community.
Who pays what mortgage expenses in Spain?
In summary – and while we wait for the new Mortgage Law to come into effect – banks must pay the AJD, the expenses of the deed, the agency and the notary fees.
The client, on the other hand, will be responsible for paying the appraisal of the house that they are about to purchase and for the copies of the deeds’ request.
