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Tax on Mortgages in Spain - Update

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The situation with the tax that needs to be paid for new mortgage registrations has been clarified with the President of the Government, Pedro Sanchez, announcing measures to make banks, not borrowers pay the tax associated with a mortgage.


The discussion and vote that lead to this decision took longer than anticipated and ran onto a second day. Of the 28 magistrates involved 15 voted in favour of the borrowers paying the tax and 13 voted for the banks to pay it. This appeared to bring an end a period of confusion and uncertainty in relation to this which had previously seen some banks withdraw mortgage products until the situation was clarified. However, the government almost immediately announced measures to fully clarify the situation and bring an end to any uncertainty.

Government announcementClarity ball amongst sea of question mark cubes

As a result of the decision, and under pressure from groups that claimed that the Government was more in favour of banks rather than consumers, the Government has announced a new law that states that it is the banks and not the borrowers who have to pay the Actos Juridicos Documentados (AJD) tax on new mortgages. This tax ranges from 0.5% to 1.5% of the value of the borrowing depending on value and location of the property.

The changes come into effect on Monday 12th November.

Purchasers still have to pay the tax associated with the actual purchase and this new law only affects the tax payable on the mortgage element of the transaction.

So what now for borrowers?

It appears that the situation has been clarified and there should not be any further confusion over this so borrowers can now continue knowing what costs are involved in their purchases. On the face of it this news appears to favour the borrowers but no doubt the extra costs will be built into the amount that the borrowers will pay over time so in reality there will be no change.