La provision of funds for mortgage It is the calculation of the expenses that accompany the sale of a property. Find out what these mandatory expenses are by reading the following article.
Provision of funds for the mortgage
When a person requests a mortgage in order to acquire a home, a process begins on the part of the financial institution in order to be able to grant said credit to the client. To comply with legal regulations, the bank performs a series of steps that are supported by the mortgage contract.
Among the legal conditions are the so-called provision of mortgage funds. This procedure allows you to calculate the expenses involved in the entire process of buying and selling a property. These expenses are the various taxes such as the AJD, ITP and VAT, as well as the fees of the notary, the agency, and the rate imposed for the sale.
The total amount of the percentage with respect to all these emoluments is in the order of 10% and 12% of the total cost of housing. Payments must be made separately, so the seller must take these expenses into account before proceeding to introduce the respective document.
However, that is not all, in addition, 20% financing must be added, since banks do not offer mortgage loans greater than 80% and 75% in cases of secondary housing. So when you buy a house you must also have 30% of additional resources depending on the price of the house.
What are they for?
This provision of mortgage funds (which in some countries have another name) is used by financial institutions to cover, among other things and other elements, the following:
The Value Added Tax in the event that the home is new, in the case of second-hand housing, the Property Transfer Tax (ITP) must be paid.
See the following related article on How to fill in form 600 which is a mandatory requirement when purchasing a home.
- Payment of commissions related to the mortgage loan.
- Property Registry Expenses.
- The rate for the acquisition of housing.
- The fees of the agency and notary.
- The Tax on Documented Legal Acts.
As the acts are different, they must be done in duplicate, one for the process of buying and selling the property and another for the formalization of the mortgage loan. The provision of funds for the mortgage varies according to the type of banking entity and according to the location of the banking agency and agency where the minutes have a different value.
The largest expenditure in the provision of mortgage funds is represented by the payment of taxes on the entire ITP. The payment of this tax as well as VAT, even depend on the type of community where the property is purchased.
Settlement of funds
In some cases, the provision of mortgage funds can generate a surplus, although this is a rare situation. In this case, the bank makes the calculations related to the difference and after a few days prepares a document in which the client must sign and approve so that they are credited to their bank account.
The process lasts a few weeks and even months, to be later credited to the account, since it must go through a verification and update process; The liquidation of funds is a process that is often slower than the home sale process, including the credit application.
After the liquidation of the house has been carried out, all the invoices and receipts that must be kept by the client are delivered, for the purpose of registering it. These invoices are even used to make claims related to ownership of the land or expenses related to the type of formalization.
The provision of funds is a necessary process that is part of the Spanish system of registration and control of real estate, also in the legal forms of taxes. Although it has some peculiarities, the process of providing funds that we have just described is related to the way in which it is established in Spain.