In addition to the agreed price, some mandatory expenses derived from the purchase must be added. Generally, to the price of the property, you should add between 11% and 13% of the purchase price, not including the contracting of utilities.
WE DETAIL THE EXPENSES INVOLVED IN PURCHASING A PROPERTY IN ORIHUELA COSTA
Property Transfer Tax (ITP)The Property Transfer Tax is only applicable to second-hand homes and usually ranges between 6% and 8% (if the property is priced above one million euros) of the property price depending on the Autonomous Community. This tax must be paid within 30 business days from the day after the contract is granted. | VATThe Value Added Tax (VAT) mainly affects new homes, with a rate of 10%, and officially protected housing built by the developer, with a VAT of 4%. In the Canary Islands, this tax is known as the Canary Islands General Indirect Tax (IGIC), while in Ceuta and Melilla it is called the Tax on Production, Services, and Importation (IPSI). |
Documented Legal Acts Tax (AJD)This tax is incurred by signing at the notary and subsequent registration in the registry. It is 1.5% depending on the autonomous community. It only applies if a new build property is purchased. | Notary and Registry ExpensesThe fees for notaries and registrars are set through government-approved tariffs, and depend on the price of the property. Approximately 1,500 EUR. |
Management ExpensesThe management company is responsible for carrying out all necessary procedures until the registration of the deed in the property registry and the settlement of taxes. Their price varies depending on the agency. |
Mortgage Expenses
Home Appraisal
Of course, here's a more detailed explanation about home appraisal:
Home appraisal is a fundamental process in the context of a real estate transaction. It is a thorough and professional assessment of the market value of a property performed by a qualified and certified appraiser.
The main purpose of the appraisal is to determine the fair and realistic value of a property in the current market. This is essential for both buyers and mortgage lenders. For buyers, an accurate appraisal provides key information to assess whether the selling price of the property is fair and reasonable. For lenders, the appraisal helps them evaluate the risk associated with granting a mortgage loan on the property.
The appraisal process begins with a detailed inspection of the property by the appraiser. During this inspection, the appraiser evaluates a variety of factors, such as the size and features of the home, the quality of construction, the state of maintenance, the geographical location, and the conditions of the local market.
A fundamental part of the appraisal process is the comparison of the property with other similar properties that have recently been sold in the same area, known as comparable sales. These comparable sales provide the appraiser with valuable data on actual selling prices in the market, which helps to determine the value of the property being appraised. Once the inspection is complete and the relevant information has been gathered, the appraiser uses recognized valuation methods to calculate the property's value in an objective and substantiated manner.
The result of the appraisal is presented in a detailed report that includes the estimated value of the property, the methodology used to determine that value, the specific characteristics of the home and the neighborhood, as well as information on the comparable sales used in the appraisal process.
It is important to note that the cost of an appraisal can vary based on various factors, such as geographical location, size and type of property, and the complexity of the process. However, the cost of the appraisal is generally borne by the buyer or the mortgage loan applicant.
In summary, the appraisal of a property is an essential step in the process of buying, selling, or refinancing a property, as it provides a professional and impartial assessment of the market value, which helps ensure fair and transparent transactions in the real estate market. The cost can range from 250-450 euros, depending on the entity and the final value of the property. The appraisal is valid for 6 months from the date of issue.
The mortgage
The amount of the loan usually does not exceed 70% of the appraisal value or purchase price (depending on the entity) in case of a primary residence, and 70%. This expense must be paid before the formalization of the mortgage.
Opening commission
It is between 0% and 2% of the borrowed capital (as agreed with the entity). This amount is directly deducted from the money given to the borrower.
Early cancellation fee
It is a percentage of the capital that is prepaid and will be paid only at the time of making the early, total or partial repayment. According to the agreement with the financial institution and current regulations, it is from 0.50% to 1%.
Formalization
The mortgage loan must also be formalized in a Public Deed and registered in the Property Registry along with the formalization of the sale in most cases.
Documented Legal Acts Tax (AJD)
The Documented Legal Acts Tax is 0.50% depending on the autonomous community.
Home insurance
If you take out a mortgage, the financial institution requires you to take out building insurance that covers the value of the mortgaged property in case of fire or other disaster. It is also advisable to have comprehensive home insurance and life insurance that covers the mortgage payments in case of death.
IAJD: The Tax on Documented Legal Acts
This tax is calculated on the amount of mortgage liability to third parties. This figure includes the requested amount plus an additional percentage intended to cover interest, costs, and expenses in case of default on the loan payments and the eventual sale of the mortgaged property by the institution to cover its losses. Generally, the mortgage liability figure, on which the IAJD is calculated, represents about 150% of the loan amount, although this can vary depending on the lending institution.
Extraordinary and Post-Sale Expenses
Maintenance Fees
Maintenance expenses, such as cleaning, repairs, renovations, utilities, and garbage collection, are influenced by the dimensions and type of property. A spacious villa with a garden and pool will demand a significantly greater financial investment and effort compared to a smaller apartment.
Community Costs
Property owners located in developments, buildings, or complexes with shared common areas are legally required to be part of the homeowners' association and to pay dues for its maintenance, as well as for any other services agreed upon at the annual general meeting. These fees will depend on the number of neighbors and services contracted by the community, which are paid annually.
Utility Contracting
Referring to second-hand homes, existing contracts are usually transferred, so only a change of ownership needs to be notified to continue under the same conditions. However, there are cases where contracting is necessary, which is usually more costly than changing ownership.
Property Tax (IBI)
The IBI, or Property Tax, is a local tax that taxes the ownership of real estate, such as homes, commercial premises, or land. It is based on the cadastral value of the property and is used to finance municipal services, such as street lighting, cleaning, security, among others.
