What are the costs associated with a mortgage?

Introduction

A mortgage is one of the most common legal procedures in the real estate market, as it allows people to own their own home. Millions of people continue to finance their home purchases and need this legal process to become owners. However, this type of contract entails a series of associated fees and expenses. Do you want to know what they are?

What are the main expenses?

The expenses associated with a mortgage have come down in recent years. The new Real Estate Mortgage Act states that the consumer pays for the appraisal and a copy of the mortgage deed. Banks, therefore, are responsible for paying the expenses associated with the Registry, the Notary's Office, the management and the Stamp Tax related to the mortgage. Excluded are cases of sale, inheritance or any act through which the property is acquired:

• The appraisal: with help from real estate market professionals, the bank calculates the approximate value of a property, the maximum amount of the mortgage. The banks will use as a reference the lesser of the appraised value and the purchase price. According to the law, this process must be carried out through a company approved and supervised by the Bank of Spain.
• Notary: the new regulation places more significance on this person. In addition to confirming that the documentation to be signed is in accordance with the applicable legal requirements, the Notary Public is responsible for advising the customer and ensuring that the mortgage deed does not include any predatory clauses. This cost is borne by the bank, as is the cost of the copy. The other copy of the documentation, however, must be paid by the customer.
• Registry: once the mortgage is signed, the property is registered in the Property Register. This process is paid by the bank by settling a fee that varies depending on the amount of the mortgage. The listing in the Register provides legal certainty in the market, preventing access to other mortgages if an unregistered property is submitted as collateral.
• Management: the management agency will register the mortgage in the Property Registry, and settle and pay the relevant stamp tax (AJD).
• Stamp Tax (AJD): This tax falls under the purview of the regional government, and is applied to mortgage deeds signed before a Notary. 

Other costs associated with a mortgage

Fees and compensation for signing a new mortgage and cancelling the old one: there are also other fees, such as early repayment (which applies if the mortgage is repaid before the established date) or the subrogation fee. Both are regulated by the Property Mortgage Act.

VAT or ITP: it will depend on whether the property is new or second-hand:

• If the property is new, VAT (Value Added Tax) must be paid, the general rate of which is 10%. However, if it is VPO (Subsidised Housing), this percentage is reduced to 4%.
• If the property is not new, that is, if at least two years have elapsed since its first ownership, it is subject to the ITP. The ITP (Property Transfer Tax) is a regional tax, the percentage of which varies depending on the area of Spain where the property is located. Its value is similar to that of VAT, and it is managed by the Autonomous Communities.
• Other expenses associated with the purchase (management, notary, etc.)

Now that you know more about the expenses associated with a mortgage, go to CaixaBank and get the latest news in the real estate market and our CasaFácil.