Understanding the hidden costs of buying property in Spain

Buying property in Spain involves more than just paying the agreed-upon price. A thorough understanding of the related costs will help you budget effectively. Here's what you should know:

Taxes for New Build Properties

If you’re buying a newly built property, the taxes you will face include:

VAT (IVA): Set at 10% of the purchase price for residential properties like villas and apartments. For building plots, VAT increases to 21%
Stamp Duty (AJD): Calculated as a percentage of the purchase price, varying by region from 0.5% to 1.5%

Taxes for Resale Properties

For resale properties, Transfer Tax (ITP) is applicable. The rate depends on the region and typically ranges from 6% to 11%. For example:

In Andalusia, rates range from 7% to 10%.
In Catalonia, rates can reach up to 11% for higher-priced properties.
In Madrid or Comunidad Valenciana, the normal rate is 6%

These variations underscore the importance of researching regional tax rates when calculating your budget. However, please bear in mind that in some cases the reduced rates can be applied.

Legal and Mortgage Costs

In addition to taxes, legal and financing fees contribute significantly to the cost of buying property in Spain. Let’s take a closer look.

Legal Fees

While hiring a lawyer isn’t mandatory in Spain, it’s strongly recommended. A lawyer can verify that the property has no outstanding debts or legal issues of any kind. Legal fees generally range from 1% to 1.5% of the purchase price. Additionally, your lawyer will help with tasks such as:

Reviewing the purchase agreement
Due diligence on the property
Conducting a title search
Coordinating with notaries and other officials

Mortgage Costs

For buyers requiring financing, mortgage-related expenses include:

Interest Rates: For non-residents, rates average 4% fixed for 25 years or Euribor + 2% for variable rates. Residents may secure lower rates, with fixed rates starting from 2.7%
Loan-to-Value (LTV): Up to 70% for non-residents and 80% for residents
Bank Arrangement Fees: Usually 0% to 1% of the loan amount. Some banks may also require you to purchase ancillary products, such as insurance, to secure the best rates
Valuation Costs: Paid upfront by the buyer, though some banks cover this fee

including taxes, legal fees, and ongoing expenses. Plan your budget effectively with our comprehensive guide.

Buying property in Spain can be an exciting venture, whether you’re searching for a new build or a resale home. However, beyond the listed price, a range of hidden costs can significantly impact your budget. From taxes and legal fees to ongoing property expenses, understanding these costs upfront is essential when considering a property purchase in Spain. This guide provides a detailed breakdown of the property purchase costs you need to prepare for, ensuring a smooth buying experience without financial surprises.

Understanding Property Purchase Costs

Buying property in Spain involves more than just paying the agreed-upon price. A thorough understanding of the related costs will help you budget effectively. Here's what you should know:

Taxes for New Build Properties

If you’re buying a newly built property, the taxes you will face include:

VAT (IVA): Set at 10% of the purchase price for residential properties like villas and apartments. For building plots, VAT increases to 21%.
Stamp Duty (AJD): Calculated as a percentage of the purchase price, varying by region from 0.5% to 1.5%.

Taxes for Resale Properties

For resale properties, Transfer Tax (ITP) is applicable. The rate depends on the region and typically ranges from 6% to 11%. For example:

In Andalusia, rates range from 8% to 10%.
In Catalonia, rates can reach up to 11% for higher-priced properties.

These variations underscore the importance of researching regional tax rates when calculating your budget.

Legal and Mortgage Costs

In addition to taxes, legal and financing fees contribute significantly to the cost of buying property in Spain. Let’s take a closer look.

Legal Fees

While hiring a lawyer isn’t mandatory in Spain, it’s strongly recommended. A lawyer can verify that the property has no outstanding debts or legal issues. Legal fees generally range from 1% to 1.5% of the purchase price. Additionally, your lawyer will help with tasks such as:

Reviewing the purchase agreement.
Conducting a title search.
Coordinating with notaries and other officials.

Mortgage Costs

For buyers requiring financing, mortgage-related expenses include:

Interest Rates: For non-residents, rates average 4% fixed for 25 years or Euribor + 2% for variable rates. Residents may secure lower rates, with fixed rates starting from 2.7%.
Loan-to-Value (LTV): Up to 70% for non-residents and 80% for residents.
Bank Arrangement Fees: Usually 0% to 1% of the loan amount. Some banks may also require you to purchase ancillary products, such as insurance, to secure the best rates.
Valuation Costs: Paid upfront by the buyer, though some banks cover this fee.

Have questions about buying property in Spain or need personalized assistance? We’re here to help. Reach out to Lucas Fox for tailored advice and support.