The Costs of Buying a Home on the Costa del Sol
Before starting to look at properties one of the most important decisions is setting your budget. The budget needs to cover both the price of the property itself plus the buying costs (taxes and fees). If you finance part of the purchase price with a mortgage the costs of buying will increase further.
Not surprisingly the major extra cost is the tax paid. The amount depends on whether you buy a new property (ie the first time that it has been sold and it has never been previously occupied) or a resale property. These taxes also vary according to where you buy in Spain as regional governments can alter some tax rates.
On the Costa del Sol the taxes are as follows:
New property: VAT (Impuesto sobre el Valor Añadido or IVA) - 10% + Stamp duty (Actos Jurídicos Documentados or AJD) - 1.5%
Resales: Transfer Tax (Impuesto sobre Transmisiones Patrimoniales or ITP) - minimum 8%
Transfer tax is calculated on a sliding scale between 8% and 10% as follows:
Up to €400,000: 8% Between €400,000 and €700,000: 9% Over €700,000:10%
So on the purchase of a €900,000 home, the transfer tax would be €79,000 ie
€400,000 x 8% = €32,000
+ €300,000 x 9% = €27,000
+ €200,000 x 10% = €20,000
Total = €79,000
Firstly the fees for a lawyer: usually 1% of the purchase price of the property + 21% VAT with a minimum charge of €1,500 +VAT
In addition, there are the Notary and Land registry fees - they are calculated in relation to the value of the property and you should allow 1% of the purchase price
Spanish banks charge arrangement fees usually in the region of 1-1.5%.
A mortgage will also increase the Notary and Land registry fees so in total it is best to allow 2% of the purchase price to cover these additional costs.
Total costs of buying
In summary, for a new property allow an additional 14% of the purchase price for the costs of buying and for a resale property 10%.
In both cases, an extra 2% should be budgeted if buying with a mortgage.