Expenses and taxes for the purchase of a home in 2024, what are they?

Expenses and taxes for the purchase of a home in 2024, what are they?
2 February

Buying a home entails various expenses and taxes that it is essential to take into consideration. What are these costs and how much should be paid?

The mortgage is not the only significant outlay when buying a property. In fact, there are numerous costs and taxes that must be incurred in order to formalize the transaction and become an owner.

These costs include the appraisal of the property, notary fees, the relevant registries and the corresponding taxes, such as VAT and ITP. It is recommended to have savings equivalent to 10% to 12% of the price of the property, varying according to the autonomous community and whether it is a new or used property.

What are the costs associated with buying a home in 2024?

  • Notary fees:    One of the aspects to consider when purchasing a home, whether new or used, are the notary fees, also known as tariffs. These range between 600 and 1,500 euros for the public deed of sale, depending on the price of the property. For example, for an apartment of 100,000 euros you would pay approximately 850 euros, while for one of 250,000 euros you would have to pay around 1,000 euros.
  • Land Registry:    The registration of the deeds in the Land Registry entails additional costs, established by law and depending on the value of the property, generally between 400 and 650 euros.
  • Lawyer: The lawyer, an optional expense, is in charge of processing the liquidation of taxes and other formalities. Their fees, as they are free professionals, range between 500 and 1000 euros. In some cases, the real estate agencies offer legal services to manage these procedures.
  • Purchase Taxes: - New Homes: As for taxes on the purchase of a new home, the most important one to be faced is the IGIC - Impuesto General Indirecto Canario (the equivalent of VAT in the Canary Islands), which in 2024 amounts to 7%. That is to say, it would suppose 7,000 euros in the case of acquiring a house of 100,000 euros and of 17,500 in one of 250,000 euros.    - Used Homes: On the other hand, for used homes, the most important tax is the Property Transfer Tax (ITP). In this case, the amount depends on the percentage applied to the deeded price and on the autonomous community in which the house is located, although as a general rule a rate of between 6% and 10% is applied.
    In addition to these expenses associated with the purchase, if it is financed through a mortgage, the following must be considered:
  • Appraisal Expenses in the Mortgage: In 2024, the appraisal ranges between 250 and 800 euros, depending on the entity and the type of property.
    Mortgage origination fee: It can reach 2% of the capital loaned, although some entities do not apply it.

  • Real Estate Fees: Some real estate agencies offer additional services, such as the real estate 'personal shopper', with associated costs.
    The payment of these expenses varies according to the buyer's choice of whether or not to contract the services of a real estate agency, the latter being responsible for making the payments in the event of contracting. In summary, the total of expenses and taxes is usually between 10% and 12% of the price of the property, depending on the value and location. 

For example, in the case that you are buying a 200,000 euro property in Tenerife, this is what you would have to pay adding up all the expenses: notary fees, fees of the professionals involved and taxes. It should be remembered that some expenses, such as notary fees, vary between several percentages, so the resulting figures may be approximate:

ExpenseNew developmentSecond-hand housing
Notary ( 0,2% - 0,5%)1.000 €1.000 €
Land registry ( 0,1% - 0,25% )500 €500 €
Lawyer (depends on the company)700 €700 €
IGIC14.000 €0 €
AJD ( 1%)2.000 €0 €
ITP ( 6,5%)0 €13.000 €
TOTAL:18.200 €15.200 €

The new tax value of homes:

Since January 1, 2022, the new reference value of the Cadastre is operative. This value is the taxable base for taxes as important as the Transfer Tax (ITP). That is to say, as we have seen, it is the key to determine how much tax has to be paid for the purchase of a house. 

This change was included in Law 11/2021 on measures to prevent and combat fraud, approved in July 2021, although its implementation was postponed until 2022. After the modification, the taxable base is no longer the 'real value' that has generated so many headaches for the Treasury in recent times and is now the 'market value', which is determined by the reference value of the Cadastre.

In other words: in the case of properties acquired since January 1, 2022, taxpayers must declare according to the reference value of the Cadastre, since it is presumed to be the market value, regardless of the value for which it is deededed. However, if the deed value is higher than the reference value, this will be the taxable base for the taxes that apply depending on the case -ITP for the purchase of used homes or Inheritance and Gift Tax for inheritances and donations-. Taxing below what the regulations dictate can result in inspections by the Tax Authorities, and even in a sanctioning file for the taxpayer. 

In the event that the taxpayer believes that the reference value does not correspond to the market value, he must appeal and prove it to the tax authorities. Therefore, the burden of proof falls on the citizen. To do so, they can provide appraisals of the property, photographs or a notarial deed justifying the real state of the property. 

The arrival of this change generated uncertainty, especially because not all properties are 'assigned' this new reference value. In such a case, and as taxpayers are only obliged to pay tax on the "market value", they can rely on the deed value and it will be up to the Treasury to prove that the deed value does not correspond to the market value if it does not agree with what the taxpayer has declared.  

Navigating the complexities of the new property tax landscape is crucial. At DOM TENERIFE Real Estate, we're here to assist at every step, ensuring you're delighted with your new home, leaving the paperwork on us!

#Cadastre # Tax base # ITP # Anti-fraud law # Taxpayers # Tax inspections # Inheritance # Appraisals # Tax change # domtenerife