Expenses associated with the purchase and sale of a home

Buying or selling a home is one of the most important financial transactions in many people's lives.

However, in addition to the price of the property itself, there are numerous additional expenses that can affect the final budget of both the buyer and the seller.

These costs range from taxes and commissions to notary and registration fees, among others. Knowing and anticipating these costs is essential to avoid surprises and to properly plan the real estate transaction.

For this reason, throughout this article, we will explain the main expenses associated with the purchase and sale of a home, offering a clear guide for those who are about to embark on this process.

Initial expenses that you cannot escape

When purchasing a home, there are a number of initial expenses that are unavoidable and must be considered from the beginning.

These costs, which go beyond the purchase price of the property, include everything from notary fees to specific taxes that vary by jurisdiction.

Understanding these expenses is essential to avoid surprises and to properly plan the financial outlay involved in purchasing a new home. We will tell you what they are:

Property Transfer Tax

The Property Transfer Tax (ITP) is a tax that is applied when a second-hand home is purchased, that is, one that is not a new build.

The ITP is managed by the autonomous communities, which means that each one establishes its own rates and conditions.

In the Valencian Community, the ITP for the year 2024 is set at 10%, although there is a reduced rate of 8% for habitual housing for young people, properties for young professionals or entrepreneurs or habitual VPO housing.

They also have the reduced rate of 6% that can be applied in cases such as the purchase of a primary residence by people under 35 years of age, and a general regime VPO home, as long as in both cases the home does not exceed 180,000 euros.

In addition, income limits have been established to qualify for this reduced rate, being 25,000 euros for individual taxation and 40,000 euros for joint taxation.

Finally, there is also the reduced rate of 4% which is for people with disabilities, large or single-parent families, or women victims of gender violence.

Value Added Tax (VAT)

Value Added Tax (VAT) is an indirect tax levied on the consumption of goods and services in Spain. It is a tax that the final consumer pays, and the seller or service provider is responsible for collecting and delivering to the State.

When you buy a new-build home, that is, a home that is purchased directly from the developer or builder and that has never been inhabited, the buyer must pay VAT instead of the Property Transfer Tax (ITP). How much is the VAT on a new home? We will tell you below:

• The general VAT rate applied to the purchase of a new-build home is 10% of the purchase price.
• In the case of officially protected housing under the special or general regime, the VAT rate is reduced and stands at 4%.

Notary fees

When buying a property, notary fees are one of the costs that the buyer must assume. These fees are related to the drafting and formalization of the public deed of sale, a document necessary for the transaction to be legal and to be registered in the Property Registry.

Depending on the documentation you need, the fees are between 0.2% and 0.5% of the value of the property listed in the contract.

Property Registry

The Property Registry is a public institution where acts related to ownership and other rights over real estate, such as sales or mortgages, are registered and officially recorded.

Registration in the Property Registry provides legal security to the buyer, protecting his or her property rights from third parties.

The costs associated with registration in the Registry depend on the value of the property, with a cost that varies as it is regulated by the Government, and is usually paid by the buyer.

Additional costs that may arise when purchasing a home

When purchasing a home, in addition to the usual expenses such as the purchase price, taxes and notary fees, it is important to take into account a series of additional costs that may arise throughout the process.

These expenses, although not always visible at first glance, can significantly influence the total budget. From the appraisal of the property to insurance and possible renovations, knowing and anticipating these additional costs is essential for proper financial planning and avoiding unforeseen events that may affect the operation.

Change/Register supplies

When purchasing a home, one of the essential aspects to consider is the costs associated with changing or connecting basic services such as water, electricity and gas.

These services are essential to ensure the habitability of the property, and the costs may vary depending on whether it is a new home (where it is necessary to activate the services) or a second-hand home (where it may be necessary to change ownership).

Home appraisal

A home appraisal is a crucial process when purchasing a property, especially if you plan to finance the purchase with a mortgage loan.

The appraisal consists of an objective assessment of the market value of the property, carried out by a certified appraiser.

This appraisal is essential for the bank to determine the maximum loan amount it can grant, usually a percentage of the appraised value.

Mortgage related expenses

When financing the purchase of a home with a mortgage, it is essential to keep in mind that, in addition to the monthly payment, there are various expenses related to the formalization and management of the mortgage loan. These expenses range from the opening fee to mandatory insurance.

Opening Commission

The opening fee is a charge that banks or other financial institutions apply at the beginning of a loan or credit contract, with the purpose of covering the administrative and management costs associated with the formalization of the loan.

This fee is usually a percentage of the total amount of the loan or a fixed amount. Its variability depends on several factors, such as the type of financial product, the institution's policy and market conditions.

In some cases, banks may offer special conditions or waivers on the opening fee to attract customers, or even include it in the total cost of the loan to offer the appearance of lower initial fees.

Mandatory insurance

When applying for a mortgage, it is common for financial institutions to require the purchase of certain mandatory insurance to protect both the borrower and the lender. These insurances are usually:

• Home insurance: This insurance covers the risk of damage to the mortgaged property, such as fire, flood or damage from natural phenomena. The financial institution requires this insurance to protect its investment in case the property suffers significant damage.
• Life insurance: Although not always required, many financial institutions recommend or require borrowers to take out life insurance to cover the outstanding balance of the mortgage in the event of the death of the loan holder. This ensures that the debt does not become a burden on heirs.

It is important to review the specific conditions of the mortgage loan and compare different offers to clearly understand the required insurance and its coverage.

At Emiris Homes, we advise you so that you can perfectly plan the purchase of your new home

At our Emiris Homes real estate agency in Dénia, we offer you comprehensive advice so that you can plan the purchase of your new home with complete security and confidence.

We will guide you through every step of the process, from selecting properties that fit your needs and budget, to managing financing and legal procedures.

With our help, you can make informed decisions and find the ideal home for you and your family, ensuring a smooth and satisfying buying experience.