What calculations should be made before acquiring a property?

Many individuals and families decide each day to acquire a property as a decisive step in a new chapter of their lives. Before doing so, it is essential to make certain fundamental economic calculations to ensure that the investment will be profitable and sustainable in the long term.

Essential calculations before acquiring a property

There are four key financial aspects that should be taken into account to minimize any economic risk after the purchase:

1. Tax burden: taxes associated with the purchase

The acquisition of a property involves the payment of different taxes according to the autonomous community and the type of property (new or second-hand):

• Second-hand property: between 6% and 10% for the Property Transfer Tax (ITP).
• Newly built property:
• 10% for VAT (Value Added Tax).
• 1.5% for AJD (Documented Legal Acts).

2. Savings for the property down payment

As a general rule, banks finance up to 80% of the value of the first home. In the case of second or third properties, the percentage drops to 60%-75%.

It is essential to have sufficient savings to cover the unfunded percentage, as well as an additional 10% for purchase expenses such as ITP or other associated costs.

3. Monthly mortgage payments

The monthly mortgage amount depends on various factors:

• Repayment term agreed with the bank.
• Type of interest: fixed, variable, or mixed.
• Total value of the property.
• Initial amount contributed as a down payment.

It is recommended that the monthly payment does not exceed 30%-35% of the buyer's net income to maintain a healthy financial balance.

4. Associated additional expenses

In addition to the mortgage and taxes, there are other recurring or one-time expenses to consider:

1. Improvement works or necessary renovations.
2. Homeowners' association fees.
3. Home insurance.
4. Utilities (electricity, gas, water, etc.).
5. Property Tax (IBI).
6. Municipal waste collection fee.

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