What are the expenses when buying a new build in Málaga and the Costa del Sol?
The customer demand to buy homes has doubled in the last year. The most common reasons to buy a new home include, to improve their current home, an increase in the number of family members, to start a new life as a couple or simply as an investment.
Are you looking for a new built home and don’t know what the expenses and taxes you will have to pay?
From PrimeHouse we will explain which are the main costs and taxes you will have to bear in mind when purchasing a new build dwelling.
Expenses and taxes associated to buying a new home
- Notary expenses
- Administrative Management costs
- Survey costs
- Registration fees in the Public Property Registry
- AJD – Taxes on Document Duties
- Municipal capital gains taxes
VAT (Value Added Tax)
The purchase of a new build means that the buyer is forced to pay the VAT (including garages, provided that the number of garage spaces assigned to each owner does not exceed two units). It will be 10% in new builds and 4% in the case of council / protected housing (council estate or public promotions).
How to calculate the tax value?
It is a simple procedure.
VAT= Tax rate x Price
Suppose the price of the home is 300,000€.
Then the VAT we must pay is:
300.000€ x 0,10= 30.000 € (VAT)
The notary expenses tend to vary according to the price of the property, the scope of the title deed, whether the property has any garages or annexes, the amount of contract holders and the number of copies required etc. These are determined by the Royal decree 1426/89. In case of requiring a mortgage, the expense will be greater, since two contracts will be needed, one to realise the purchasing and another for the mortgage. The approximate cost of this is around 0.2 or 0.3% of the value of the purchase.
The buyer has the right to choose the notary within the municipality where the property acquired is located. This professional will charge a fixed fee determined by the government in 1999, so all the notaries in Spain charge the same for identical services.
Administrative Management costs
The administrative company (Gestoría) ensures the correct functioning of the necessary administrative procedures to carry out the loans with mortgage guarantee. They are responsible for delivering the bank papers to the notary, from the notary to the property registry and, once registered, return them to the bank.
The managers are free professionals, therefore, they do not have specific rates. The approximate cost is between 400 and 600 euros.
3.1 Administrative / mangement costs due to mortgage subrogation
The expenses due to subrogation do not depend on the value of the mortgage, it only depends on the rates charged by the Gestoria, usually its between 200 or 400 euros.
3.2 Administrative / management expenses in the case of Mortgage novation
The fee that an agency charges to process a modification in the mortgage conditions due to a novation does not depend on the value of the mortgage, since the process is always the same. Therefore, the cost depends on the rates of the agency, since the services are regulated by the law of demand and supply of the market. However, the price is usually around 200 euros.
The new Mortgage law which will be implemented in the near future, determines that the subrogation and novation in the mortgage loans will be free. This will grant the buyer more freedom and will favour competition between the different banking entities.
Survey / Appraisal costs
In new builds, the appraisal of the home is already included. Those who are going to get a mortgage do not need another appraisal of the home, since the mortgage is constituted before, and therefore, it was then that the bank may have needed an appraisal and performed it.
Example: If a new build home is purchased, and said dwelling has a mortgage (which the promoter signed with the entity at the time) and the buyer wants to subrogate said mortgage, he / she will NOT need to appraise the dwelling.
Registration fees in the Public Property Registry
For the home to fully belong to the buyer it must be registered in the Public Property Registry, and that means we must incur in yet another expense. The cost is legally fixed and will depend on where the property is located and the cost of the purchase. The cost is approximately 0.15 or 0.2% of the value of the purchase.
Taxes on Document Duties
To formalise in a public document the sale deeds of new construction homes, it is subject to the Tax on Patrimonial Transfers and Documented Legal Acts, in the form of Documented Legal Acts.
The Tax on Documented Legal Acts (AJD) relates to notarial documents. This tax is paid whenever a notarial document is signed with an economic amount and can be registered in the Registry, similar to the buy/sell of new homes and mortgages. The management of this tax is under the umbrella of the autonomous communities and must be settled through the 600 self-assessment model form.
In the first copies of notarial deeds and purchasing deeds the tax rate will be obtained by applying 1.5% rate (in Andalusia) on the taxable base of the value of the home (Law 3/2012)
The new Mortgage Law establishes that the bank will be responsible for the tax of legal acts documented in the constitution, subrogation or novation of the mortgages.
Municipal capital gains taxes
When the seller is a real estate developer, the law forces him to pay the municipal capital gain and the expenses of the declaration of new works and horizontal division. You must also pay the cancellation of the mortgage that exists on the house as long as you do not subrogate to it.
If you have any queries or doubts, at PrimeHouse we will be happy to help you with any questions that may arise. Download our brochure and know the expenses that you are going to have when owning a house in Málaga and the Costa del Sol.