When purchasing a house there are a number of taxes and expenses which must be added to the mortgage payment and so must be taken into account. Sometimes, when one thinks of the amount of money that must be used to purchase a house, usually only the mortgage is considered in the cost. However, apart from the payment for the property, there are other additional taxes and expenses that must be covered. Which are they? First of all, we want to point out that, today, we are going to write about the additional taxes and expenses that must be met by the buyer. These costs are not the same as those that the seller must bear. In the case of the buyer, two taxes must be paid when purchasing a house: the Value Added Tax (VAT) and the Tax on Documental Legal Transactions. Regarding the VAT, the buyer will pay a reduced income tax rate, that is 10% on the selling price of the house. Nevertheless, in the Canary Islands the VAT is only 6,5% being the only autonomous community where the VAT is not 10%. As regards the Tax on Documental Legal Transactions, the buyer must pay a levy which varies from one autonomous community to another, as we will now see. If the house that is purchased is second-hand, then the Property Transfer Tax must be paid, it being a percentage applied to the sales price reflected in the sales-purchase deed. This percentage also changes depending on each autonomous community, as we will now see.

TAXES OF THE DIFFERENT AUTONOMOUS COMMUNITIES

In the event of purchasing new housing, the Tax on Documental Legal Transactions will be 1,5% in most of the autonomous communities. This percentage is in force in nine communities (Aragón, Cantabria, Castilla-La Mancha, Castilla and Leon, Catalonia, Community of Valencia, Extremadura, Galicia and Murcia). Regarding the rest, in three communities, Andalusia, Asturias and the Balearics, 0,7% is paid. In the Canary Islands, 0,4% must be paid whereas in the Basque Country nothing at all is paid. In relation to the purchase of second-hand housing, there are no taxes on Documental Legal Transactions, as we have already said. Nonetheless, there are Property Transfer Taxes which will be 8% in six autonomous communities (Aragón, Asturias, the Balearics, Castilla and Leon, Extremadura and Murcia). In four communities (Cantabria, Catalonia, Community of Valencia and Galicia), this tax will be 10%. In two communities (Andalusia and La Rioja), it will be 7%. As for the Canary Islands, it will be 6,5%. In four communities (Ceuta, Community of Madrid, Melilla and Navarra), it will be 6%. And lastly, only in the Basque Country the tax will be 4%. We must also add that in some communities there are lower rates for subsidized housing. Regarding the Community of Madrid, a buyer with a large family pays 4% in Property Transfer Taxes when purchasing a second-hand habitual residence.

OTHER ADDITIONAL EXPENSES

Apart from paying taxes, we must take into account other expenses derived from the purchase of a house. These include the expenses of the mortgage related to the appraised value of the home (a cost between 200 and 600€, depending on each case). In addition, there is a Commitment Fee which may be up to 2% of the loan, although some financial entities meet these costs themselves. Apart from these mortgage expenses, we must bear in mind the professional fee of the gestoria which is not a compulsory expense but, if used, can reach the amount of around 300€. The buyer does not bear the cost of the rest of the expenses because since the new Mortgage Law came into force the expenses of the notary, the Property Registry Office and the taxes on Documental Legal Transactions are paid for by the financial entities.

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Picture 02: jcomp