Buying a property means making a significant investment, so it is necessary to plan all the expenses and taxes that need to be paid carefully. It’s not just about paying the price, but also other associated costs that can be substantial. In this post, we will explain how to calculate the costs of buying a property.
What are the costs of buying a property?
The costs you should consider when purchasing a property are as follows:
– Notary fees for the execution of the deed of sale. This cost depends on the number of pages in the deed, the copies requested, and the amount of the transaction. Notary fees are regulated by law.
– Land Registry fees for registering the property.
– Administrative agency fees for handling the submission of the deed and the payment of taxes.
– Legal fees for lawyers who provide advice on the transaction and draft the deposit agreement or the deed of sale.
– Costs related to setting up a mortgage on the property. These vary depending on the case:
·Property valuation.
·Life insurance.
·Home insurance.
·Mortgage arrangement fee.
·Cost of other linked products (such as credit cards or bank accounts).
– Estate agency commission. If an estate agency has been involved and you’ve agreed to pay a fee, this cost must be considered.
– Bank fees for issuing cheques or making transfers.
In addition to all of the above, we must not forget the property purchase taxes: VAT or Transfer Tax (ITP), depending on whether it is a first or second transfer; and the municipal capital gains tax.
How to calculate the costs of buying a property?
Generally, it is considered that the costs of buying a property amount to between 10% and 12% of the property price.
However, it is always advisable to make a more accurate calculation to have a clear picture and be well-prepared.
Elements needed for the calculation
To calculate the costs and taxes of buying a property, you will need three elements:
– Property price.
– Autonomous Community where it is located.
– Whether it is a new-build or a second-hand property.
How to do the calculation?
You can do several things:
– Try a simulator from a bank or a property portal. For example, this one from Kutxabank or Fotocasa’s calculator.
– Ask the Notary for information on their fees as well as those of the Land Registrar and the administrative agency.
Example of calculating property purchase costs
For example, if the property costs 200,000 euros and is located in Catalonia, the costs will be as follows:
For the property deposit, you will need around 40,000 euros.
– The public deed will cost around 700 euros.
– Registration in the Land Registry will cost 200 euros.
– The administrative agency may charge around 400 euros.
– The property valuation will cost around 400 euros.
To this, you should add other costs related to the mortgage, such as commissions or insurance, and approximately 5% for the estate agency commission if one was involved.
When Are the Expenses Paid?
This will depend on whether you have hired an administrative agency. Notaries usually work with an agency, and what is done is a provision of funds before the sale, which covers all expenses and tax payments (Notary, Land Registry, agency, taxes).
If you have not hired an agency, you will need to pay for the deed at the time of signing.
Who Pays the Costs of the Sale?
The first thing we need to be clear about is the regulation in Article 1,455 of the Civil Code, which states the following:
The costs of drafting the deeds shall be borne by the seller, and the costs of the first copy and any subsequent copies after the sale shall be borne by the buyer, unless otherwise agreed.
If the sale deed states that the expenses are paid “according to the law,” the Civil Code regulation applies. However, other agreements can be made:
– Expenses can be split 50/50 between the buyer and the seller.
– The buyer can pay all the expenses, while the seller covers the municipal capital gains tax.
Who Pays the Property Tax (IBI)?
The IBI is another tax to consider. It must be paid by whoever owns the property on 1 January each year. For example, if the sale takes place on 4 April 2025, the seller will pay the IBI for that year.
It is possible to agree on a prorated payment of the IBI, so that each party pays according to the period of ownership. In this case: from 1 January to 4 April, the IBI is the seller’s responsibility, and from 5 April onwards, it falls to the buyer.
How to Prepare for Paying the Costs of the Sale?
We’ve seen that the costs of the sale, along with taxes, can amount to significant sums. For this reason, it is essential to consider the following:
– You will need to have saved 20% of the property price for the deposit. This is because banks usually lend no more than 80% of the property’s appraisal value as a mortgage.
– You will also need to save 12% of the property price for expenses and calculate them to avoid surprises.
Therefore, long-term savings planning is crucial when buying a home. It’s important to be clear about how much money you will need and what your income is.
Can You Save on Property Purchase Costs?
The answer is yes. Here are some tips:
– Although Notary fees are regulated by law and all notaries charge the same, they do have some leeway to offer a discount (around 10%). This can be a significant amount in high-value transactions.
– Another way to save is to handle tasks that the agency would normally do yourself. For example:
· Paying taxes.
· Registering the sale deed with the Land Registry.
· Updating the property ownership with the Cadastre for tax purposes.
– If you are applying for a mortgage because you need financing, remember to compare offers from different banks. There can be significant differences between institutions. Don’t just focus on interest rates—insurance costs and other products can also affect the total expenses.
– Another obvious way to reduce the costs of buying a property is to negotiate the price. All the costs we’ve discussed are calculated based on the purchase price.
In conclusion, buying a property requires planning and saving to clearly understand how much money you need. It is also important to have the support of expert real estate advisors who can guide you through the process and answer any questions. The team at Proddigia is at your service, whether you are a buyer or a seller.
