What are the costs of arranging a mortgage?

When applying for a mortgage, it is important to know how much we will be paying in additional costs and taxes because they will push up the total price of our new home.

Costs of arranging a mortgage

If you are looking to finance the purchase of your home through a mortgage loan, here are the mortgage-related costs you will need to take into account:

Arranging a mortgage inevitably entails various fees and costs:

Appraisal costs

The appraisal, or valuation, must be conducted by an approved company supervised by the Bank of Spain. These costs include a fixed component and a component that varies, depending on the type of property and other factors.

Notary fees

All mortgages must be formalised in a public document. Notary fees are set by law. The total bill will depend on the amount of the transaction, the number of pages of the deed and the number of copies issued.

Registry costs

As with the property you are buying, your mortgage must also be filed at the Land Registry. The mortgage filing fees are set by law and will depend on the characteristics of the mortgage.

Stamp duty (Impuesto de Actos Jurídicos Documentados, or AJD)

Stamp duty is a tax levied on legal acts that are documented, including public instruments signed before notary. The final amount will depend on the amount of the mortgage and the autonomous community in which the property is located, and range from 0.5% to 1.5% of the mortgage liability (principal plus interest and expenses). We, as the bank, pay this tax.

Mortgage management costs

The bank will instruct an agency to have the deed filed at the Land Registry and pay the corresponding tax on its behalf.

Arrangement fee

The bank may charge the customer a fee for awarding the mortgage. This arrangement fee typically ranges from 0.5% to 2% of the amount borrowed, although in some cases the bank may choose to waive this fee.

Non-certified registry copy (nota simple) or certified registry certificate (certificación registral).

Sharing of mortgage costs

The reform of the Spanish Mortgage Law of 2019 ushered in a new system on how mortgage costs should be shared between the owner and the bank. These costs are now carved up as follows:

Costs borne by the owner: the owner must now pay the appraisal fee and the cost of issuing the non-certified registry copy (nota simple).
Costs borne by the bank: the bank is now required to pay the notary's fees, the registration fee, the fees of the management agency and stamp duty.

Other costs of buying a home

So far we have discussed the costs of arranging a mortgage to purchase a home. However, there are also various costs related to the actual sale and purchase of the property. These costs cannot be avoided and the total amount will depend on the price of the property.

These compulsory expenses when purchasing a property include the following:

Estate agent fees: if we buy through an estate agent, we will need to add its fee when calculating the total costs.
Fees charged by the management agency for processing the purchase and sale.
Notary fees: meaning the fees the notary charges for drawing up and witnessing the public deed of purchase and sale. Notary fees are set by law and are calculated according to the type and value of the property, the length of the deed (number of pages) or the number of copies made. If the earnest money contract stipulates that the costs will be met by the parties in accordance with the law, it will be the seller who pays the fee for issuing the original instrument.
VAT (Impuesto sobre el Valor Añadido, or IVA) or property transfer tax (Impuesto de Transmisiones Patrimoniales, or ITP): which of these taxes we pay will depend on whether we are buying a new or second-hand home. When buying a new home, the VAT rate will be 10% in general, or just 4% in the case of state-subsidised housing. For second-hand properties, no VAT will be payable, but we will have to pay property transfer tax, which is different in each autonomous community of Spain (between 6% and 10% of the purchase price).
Cost of filing the deed of purchase and sale: this is a further cost of buying a property and is charged for filing the purchase and sale of the property at the Land Registry. Registry fees are also set by law.

In a nutshell, buying a property comes with a number of additional expenses relating to the actual sale and purchase and also the mortgage if we require financing. It is important to be aware of all these costs to avoid unpleasant surprises when the time comes to pay.

If you have already found a property and know how much it costs, be sure to calculate your fixed or variable mortgage repayments with our mortgage simulator.

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