A mortgage is not the only major expense when purchasing a property. There are numerous costs and taxes involved in completing the transaction and becoming the legal owner.
Between property valuation, notary fees, land registry costs and taxes (VAT, transfer tax, etc.), experts recommend having savings of around 10% to 12% of the purchase price, depending on the autonomous region.
What are the costs of buying a property?
These are the costs you will have to face in 2024 if you buy a home:
Notary fees when buying a property
One expense to take into account when buying a home, whether new or second-hand, is the notary. Notary fees, known as tariffs, are regulated by the State and all notaries charge the same for identical services.
In the case of granting the public deed of sale, prices range between €600 and €875, depending on the property price. For example, for a €100,000 flat you would pay approximately €850, while for one costing €250,000 you would have to pay around €1,000.
Everything about the role of the notary in a property transaction.
Registering the property in the Land Registry
It also costs money to register the deeds signed before the notary at the Land Registry. Again, fees are set by regulation and depend directly on the property price, although they usually range between €400 and €650.
Everything you need to know about the Land Registry.
Agency (gestoría) fees
The only optional cost in a property purchase is the agency fee. This is a firm the buyer can hire to handle tax settlement and other paperwork. These are freelance professionals, so there are no fixed rates. They are usually hired only when a mortgage is taken out to acquire the property. The approximate cost is €300.
Taxes paid when buying a home
The buyer must also have an extra buffer to pay taxes, although the amount will depend on the property price and whether it is new or second-hand.
Regarding taxes on the purchase of a new-build property, the most important is VAT, which in 2024 stands at 10%. That is, €10,000 for a €100,000 property and €25,000 for a €250,000 one. In the Canary Islands, the General Indirect Canary Tax (IGIC) is 6.5%. In the case of public housing, VAT may be 4%, but this varies depending on the autonomous community and the type of subsidised housing.
In addition to VAT, a second tax must be paid: Stamp Duty (AJD), which is still paid by the buyer and depends on the autonomous community. These are the rates applied to a main residence:
On the other hand, for second-hand properties, the most important tax is the Property Transfer Tax (ITP). In this case, the amount depends on the percentage applied to the deed price and the autonomous community where the property is located, although generally a rate between 6% and 10% applies. Currently, these rates apply to a main residence:
It should be noted that reduced rates usually apply to subsidised housing (VPO), large families, people with disabilities, young buyers or properties located in rural areas. For example, in Madrid, large families buying a free-market property will pay 4% ITP on the deed price, provided the property is their main residence.
Other costs associated with buying a property
If the buyer acquires a new or second-hand property through a mortgage loan, some additional costs must be added:
Mortgage valuation costs
If the buyer applies for a mortgage, they must pay a valuation company to assess the property so the bank knows what percentage of financing it can grant. In general terms, banks lend up to 80% of the purchase price or the appraisal value, although some may finance 90–100%, usually based on the lower of the two.
In 2024, the valuation cost ranges between €250 and €600, depending on the valuation company, the type of property and its value. The valuation is valid for 6 months from the date of issue.
Mortgage arrangement fee
This fee can reach up to 2% of the loan capital, depending on what is agreed with the financial institution. This amount is deducted directly from the funds delivered to the borrower. However, many banks do not apply this fee. It should also be noted that if the bank charges an arrangement fee without informing the client, it is considered an abusive practice. The arrangement fee is illegal when the bank charges for services not actually provided or for unjustified costs.
Estate agency fees
In many cases, some estate agencies offer a service whereby they search for properties on behalf of their clients and charge for it. This is known as a real estate ‘personal shopper’ service.
How to pay the costs of buying a property
The payment of purchase costs varies depending on whether the buyer chooses to hire an agency:
The role of the agency in a property transaction
If the buyer hires an agency, it will handle all procedures and payments. In this case, the buyer must make a provision of funds a few days before signing the deed of sale. The agency will use this amount to pay its fees, as well as the notary, land registry and tax office invoices. Any remaining funds will be refunded; if there is a shortfall, the buyer must make an additional payment.
Making payments without an agency
If the buyer decides to handle the procedures themselves, they must pay the notary and land registry invoices during the same visit to the notary’s office.
As for taxes, VAT and IGIC are paid to the seller, while ITP and AJD are paid to the regional tax authority.
What are the total costs of buying a property?
Total costs and taxes usually amount to between 10% and 12% of the property price. The exact amount depends on the property value and the autonomous community where the transaction takes place.
For example, if you buy a €200,000 home in Madrid, these would be the total costs, including notary fees, professional fees and taxes. Please note that some costs are approximate:
Cost New-build property Second-hand property
- Notary (between 0.2% and 0.5%) €1,000 €1,000
- Land Registry (between 0.1% and 0.25%) €500 €500
- Agency (depends on the agency) €300 €300
- VAT €20,000 €0
- AJD (in Madrid in 2024 it is 0.75%) €1,500 €0
- ITP (in Madrid in 2024 it is 6%) €0 €12,000
- TOTAL €23,300 €13,800
The new tax reference value of properties
Since 1 January 2022, the new cadastral reference value has been in force. This value is the tax base for major taxes such as Property Transfer Tax (ITP), making it key to determining how much tax must be paid when buying a home.
This change was included in Law 11/2021 on measures to prevent and combat tax fraud, approved in July 2021, although its implementation was postponed until 2022. After the change, the taxable base ceased to be the ‘real value’ and became the ‘market value’, determined by the cadastral reference value.
In other words, for properties acquired from 1 January 2022 onwards, taxpayers must declare according to the cadastral reference value, as it is presumed to reflect market value, regardless of the deed value. However, if the deed value is higher, this will be the taxable base for the applicable taxes. Declaring below the regulated value may lead to tax inspections and penalties.
If the taxpayer believes the reference value does not reflect market value, they must appeal and prove it to the tax authorities. Evidence may include property valuations, photographs or a notarial report.
This change caused uncertainty, especially since not all properties have an assigned reference value. In such cases, taxpayers may base taxation on the deed value, and the tax authority must prove otherwise.