16/10/2015
I had this query from a client today and thought both it and my response to it would be of use to those agents out there who have to explain to their clients why buying with a mortgage can be so much more expensive than paying cash. I hope this is of use to you.
Hello Chris,
Many thanks for your e-mail.
Sorry - can you please advise on the what the two separate costs are indicated here, and why the separation?
I am a little surprised by the 18+% closing costs, I had budgeted for between 12 & 13% based on advice I had previously received – has there been any recent increases that I should be aware of?
Many thanks again for your time.
Kind regards.
if you were paying cash for a property, then only the first column of costs would apply.
When buying with a mortgage, then the second column applies;
Tax; the tax is 1.5% of the total responsibility of the loan, typically 150% of the amount borrowed, i.e; 50,000€ loan *150% =75,000€*1.5%=1,125.00€
Notary costs; the notary will normally charge approximately 50% more for preparing the mortgage agreement than he does for the purchase document hence the extra cost.
Land Registry; The registrar will behave in a similar manner to the notary, as the document is larger and involves a little more work he will charge more.
Paperwork; this is the fee which the Gestor, a bank sub contractor will charge for collecting the documents at the notaries, taking them to the land registry and paying all of the fees and taxes on your behalf.
The last 1.000€ is my brokerage fee which includes the preparation of the mortgage and the sale and completion at the notaries.
Your safeguard which is extremely important is the following; you will put your money into your bank account, to which only you have access, when the mortgage is prepared and the completion is ready, the bank will pay into your account the amount of the loan. They will then draft a cheque on your account for the purchase price made payable to the owner of the property. You will then authorise the Bank to pay on your behalf all of those costs previously mentioned, these amounts are an overestimation, any money left over after all of the bills are paid will be refunded into your account by the Bank, and they will present you with a complete breakdown of the monies spent.
My fees will be payable on the day of completion, not before.
As you can see, only the taxes are percentages, therefore the lower the amount of the transaction, the higher the costs in percentage terms.
The only money which should change hands before completion is possibly a deposit paid by you to reserve the property. All other monies are paid by you through your bank, and should be made very clear along the lines I have detailed earlier.
If you prefer to use a different broker, the only cost which should vary is his brokerage fee and the service he will provide, all of the other costs are administered by the lender and are out of our control, the only variable between lenders is the fee for the Gestor(paperwork), which can vary by up to 200€.
I hope this has answered your questions, please feel free to ask if I can be of any more help.
