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Are you going to buy a house? Know all the costs and taxes…

Posted by Isabel Romano on April 15, 2021

Are you thinking of buying a house and want to know all the costs involved? At the end of this article, you will find an example of the total costs to buy a € 120,000 home through a mortgage loan – around € 4,000. But first, get to know each of the papers, taxes and commissions you have ahead of you, and learn how I can help you with all the bureaucracy and how to negotiate the best conditions with the various banks. Our KW team can provide support in the financing process since our agency Kellers Williams has a Credit Intermediary Authorised by Banco de Portugal.

Whenever there is a financial transaction for the purchase/sale of a property, the IMT – Municipal tax on Onerous Property Transactions is paid. The table varies depending on whether it is:

  • Urban or Rustic Property;
  • Location (on the continent or in the autonomous regions);
  • Purpose (Own and permanent housing or secondary / investment housing).

You will also have to pay the Stamp Tax explained below.

And how much will you have to pay for IMT?

The value of the IMT is the result of applying the following formula:

  • IMT = (Property Value * Rate to be applied) – Portion to be written off

The value of the property is the greater of two values:

  • Property Value of Property;
  • Value of the Deed.

How much will Stamp Tax (IS) cost me?

Being an “old-fashioned” tax, since the transaction does not have a stamp anymore, it is a tax where the State obtains a very interesting collection. When buying a home with equity capital, you will have to bear a 0.8% tax on the property value (as mentioned in the previous point). Thus, the value of the IS is the result of the following formula:

IS = Property Value * 0.80%

Moving on to registration costs…

The transaction of the property has several costs for its legal formalisation. This formalisation is carried out with a deed of purchase and sale of the property, which can be carried out in different locations. Noteworthy are notary offices and land registry offices. Recently, the State created the Casa Pronta modality that ends up centralising in one place the necessary acts for the deed (it is also possible to pay taxes here).

Alternatively here in Tavira, there are also two other private solutions:

  • Notary’s Office Bruno Torres Marcos and
  • Notary’s Office Joana Geraldo Dias.

The cost of using Casa Pronta, in the form of equity purchase is € 375. At this time of confinement, Casa Pronta may have requirements in terms of the number of people that can attend and that should be checked.

The cost in notary offices may be higher, but it will depend on the tables specific to each of the establishments.

What about IMI (Municipal Property Tax)?

The well-known IMI is a cost that falls on all those who have a property. This value is calculated based on a table issued by the Government, with the rate varying from 0.3% to 0.8% of the taxable equity value (which is usually much lower than the acquisition value).

You can check the taxable equity value of your property on the Finance Portal.

And… are there more costs?

In addition to registration and tax costs, when buying a house please also consider other costs such as:

  • Insurance premiums;
  • Condominium; ( usually a monthly or quarterly payment)
  • Other expenses that arise in the meantime (such as, for example, maintenance of the property).

And if you use a mortgage, what costs will it have?

Buying a property using bank financing has a broader set of costs. Thus, the costs mentioned above will still need to consider:

Bank Fees: They vary according to the financial institution, but on average you can count on an amount close to € 1,000. We are talking here about evaluation committees, a study of the process and others. This value will also depend on protocols that exist. For example, KW partnerships make it possible to reduce these commissions significantly.

Stamp Duty: Bank financing gives rise to the payment of stamp duty on the amount financed. Thus, it will bear an IS of 0.6% on the financing amount.

Registration: The deed registration mentioned above was only for one act. However, it is also necessary to register the loan with a mortgage (commonly known as a mortgage on the property in favour of the bank). In this case, the cost instead of € 375 becomes € 700.

Life Insurance: Banks require payment of life insurance to cover the death of the contract holder. This amount will depend on several factors such as the insurance company, the age of the claimants, the amount owed and the health conditions of the client.

Multi-risk insurance: This will also vary according to the value of the property.

Example for the purchase of a permanent home of € 120,000 with Mortgage Loans

To simplify the analysis, let’s take an example of a mortgage loan contract for the purchase of a property. In this case, we will have the following costs:

IMT: € 551.86

Stamp duty on purchase: € 960

IS on financing: € 720

Home Ready Registration: € 700

Bank fees: € 1,000

TOTAL: € 3,931.86

The costs for those who are going to buy a house are significant. However, given the rising costs of renting, the purchase of a home through mortgage loans is most often the most advantageous deal.

If you intend to buy a house, call me and I will be happy to accompany you in this process.

Isabel Romano

2 thoughts on “Are you going to buy a house? Know all the costs and taxes…

  • Elizabet Wardill
    on November 27, 2021

    Hi there to every body, it’s my first pay a visit of this web site;
    this blog carries amazing and genuinely fine data for visitors.

    • Isabel Romano
      on November 28, 2021

      Thank you Elizabet for your feedback. Wishing you a wonderful Sunday.

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