Mortgage tax ruling: one less property buying cost in Spain

Buying property in Spain involves quite a few costs, some of which can seem rather unforeseen. On average, you should expect to pay up to 15 per cent of the purchase price of a property in costs, but the good news is that this figure has dropped a little, thanks to a new tax ruling that came into force on Thursday 8th November 2018.

The dreaded Stamp Duty or mortgage tax (AJD – Actos Juridicos Documentados) is officially stated as making up between 1 and 1.5 per cent of the mortgage value, depending on the region of Spain you are buying in. But from now on, Spain’s government decided that banks and other lending institutions – not clients will be liable to pay the tax.

Why? Because judges have determined that lending institutions are the only parties with a vested interest in having loans documented by a notary because it enables them to start foreclosure proceedings if mortgage payments are not met.

The levy is applied to the mortgage guarantee (the loan plus possible foreclosure costs) and could total 1,500 euros on a 180,000-euro loan in Madrid. Carlos Cruzados, chairman of the union of budget ministry technicians, Gestha, confirms: “We still need to study the ruling in-depth, but after a first look it seems that, given that the four-year legal term has not expired, borrowers will be entitled to claim their money directly from the tax agency, which in turn will claim it from the banks involved.”

“The decision implies a severe setback for the Spanish financial system and joy for every mortgage-payer, who might get back a significant amount” of money, says Fernando Encinar, head of research at property website Idealista. Shares in Bankia, CaixaBank, Bankinter, Sabadell, and BBVA tumbled in the Spanish stock market following the ruling.

The change now leaves borrowers free to apply to the European Parliament in Strasbourg to backdate and reclaim monies paid.

All said and done, we can expect that in the short term, banks and other lending institutions will likely raise their mortgage arrangement fees to compensate for this new cost.

By Adam Neale | Property News | November 20th, 2018

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