Tancrede de Pola (OP Columnist)
WHEN taking out a mortgage it is a good idea to know what you’re getting yourself in to.
It is not uncommon for people to be shocked and surprised when so-called ‘hidden fees’ arise without warning.
At the Finance Bureau, we have taken the step to inform all our clients about what fees to expect down the line.
And I strongly believe that it is integral to the broker-client relationship to be honest and upfront about costs from the get-go.
Equally the Finance Bureau does not take any payment from a client until the mortgage process has reached completion… we effectively work for free until a client gets the deal they want.
This also rings true of the fees I am about to outline, all of which are levied at completion (apart from the valuation fee).
This (valuation) fee is only requested after your application has been fiscally approved. The cost is dependent on the value of the property, but is usually around 0.01% or between €300 and €1000.
The remaining fees are payable on completion at the notary and consist of:
Bank opening fee: this will be paid directly to the bank and the charge ranges from 0.75% and 1.5% of the mortgage amount, subject to negotiations. Generally speaking the more properties included in the deal, ie., when we are packaging an entire development, the more chance there is of negotiating a lower percentage fee.
Next up, the AJD standing for Actos Juridicos Documentados, or (more simply put) stamp duty tax.
This works out as 1.5% of the total amount repayable and therefore the actual fee is somewhat nearer to 2.5% of the loan amount. The only way of reducing this is by taking the loan over a shorter term as the total interest paid will be lower.
It is important to know that at notary, the purchase and mortgage are considered separate entities. In other words there will be a notary, gestoria and land registry charge charge for both. This means that the notary will need to draw up a title deed/escritura with a gestoria (who calculates the correct taxes and other costs to be included in the title).
These notary costs vary depending on the length of the escritura, type of property, location, etc. Generally, expect to pay €400-600 for the gestoria, a similar amount for the land registry and, you guessed it, €800 -1200 (dependent on the mortgage amount) to the notary for drawing up the title deed.
Again, one other thing to mention is insurance. As a condition of the loan, banks will usually require the client to take out building or life insurance, or in some cases both.
It is compulsory to keep the insurance for a year; if it is then cancelled the bank reserves the right to raise the interest rate charged by up to 0.5%.
