Buying a property in Madrid involves more than just the purchase price. Taxes, notary fees, registration costs and other associated expenses can significantly increase the initial investment.
Understanding these additional costs is essential to planning your budget and avoiding unexpected expenses.
At Montenegro Brokers, we explain the main costs you should consider when purchasing a property in Madrid.
1. Property Taxes: Transfer Tax or VAT
Taxes represent the largest additional expense when buying a property in Spain. The amount depends primarily on whether you are purchasing a resale property or a newly built home.
Resale properties: In the Community of Madrid, the standard Property Transfer Tax (ITP) is 6% of the applicable taxable value.
For example, when purchasing a property for €1,000,000, the tax would amount to €60,000, assuming the purchase price is also the applicable taxable value.
In certain circumstances, real estate companies purchasing properties for resale may qualify for a reduced 2% transfer tax, provided they meet the relevant legal requirements.
New-build properties: These are generally subject to 10% VAT, plus Stamp Duty (AJD), which is typically 0.75% in Madrid for residential properties valued above €180,000.
2. Notary and Land Registry Fees
The signing of the public deed of sale before a notary and the subsequent registration of the property with the Land Registry involve additional costs.
Notary fees are regulated by law and depend on the property’s value and the complexity of the transaction. As a general budgeting guideline, buyers may allow approximately 0.2% to 0.5% of the purchase price, although actual fees may be lower.
Land Registry fees can be estimated at approximately €700, depending on the specific transaction.
3. Property Valuation, Legal Fees and Administrative Costs
In addition to taxes and registration expenses, buyers should consider several other potential costs.
Property valuation: If you require a mortgage, an official property valuation will generally be necessary. This typically costs between €500 and €1,000.
Legal advice: Although not always mandatory, working with a specialised property lawyer provides additional security throughout the transaction. Legal fees may range from approximately €1,500 to €3,000, depending on the services required.
Administrative services: A gestoría can assist with the administrative procedures involved in the purchase, with fees generally starting from around €300.
It is worth noting that, under current Spanish mortgage legislation, certain costs associated with formalising a mortgage are covered by the lending bank.
4. How Much Extra Should You Budget When Buying a Property?
To illustrate these expenses, let’s consider the purchase of a resale property in Madrid for €1,000,000.
A private buyer would generally pay approximately €60,000 in Property Transfer Tax, in addition to notary and registration fees and, where applicable, valuation, legal and administrative costs.
For a transaction of this nature, additional expenses could amount to approximately €65,000, depending on the services required and the circumstances of the purchase.
At Montenegro Brokers, we therefore recommend allowing an additional 8% to 10% of the purchase price as a prudent budgeting guideline when purchasing a resale property in Madrid.
For new-build properties, buyers should budget a higher percentage due to VAT and Stamp Duty.
5. Mortgage Financing for International Buyers
Madrid continues to attract international buyers looking to purchase a home or invest in the city’s property market.
For non-resident buyers, Spanish banks typically offer mortgage financing of approximately 60% to 70% of the property’s value, depending on the applicant’s financial profile and the lender’s criteria.
Mortgage interest rates may, as an indicative reference, be around 2.55% to 3%, although actual rates vary according to market conditions, mortgage structure and individual circumstances.
At Montenegro Brokers, our relationships with various banking institutions allow us to help clients explore mortgage financing options and connect them with specialised professionals, with the aim of identifying competitive terms suited to their individual needs.
6. Buying a Property in Madrid with Montenegro Brokers
Understanding the full costs associated with purchasing a property is essential to making a well-informed investment and avoiding unexpected expenses.
At Montenegro Brokers, we guide our clients throughout the entire purchasing process, providing personalised advice supported by our extensive knowledge of Madrid’s property market and our trusted network of legal and financial professionals.
Whether you are a Spanish resident or an international buyer, our goal is to make your property purchase as smooth, transparent and straightforward as possible.