What are the costs of buying a first home?

From the expenses for the notary to the calculation of taxes: all the costs for the purchase of the first home in Italy and in Europe.

Based on a study we conducted, it appears that in Italy the costs for the purchase of a first home are among the lowest in Europe.

The costs for the purchase of the first home, however, are not to be underestimated because they can represent up to 10% of the price of the house: a cost that can drastically affect the choices to be made during the search and selection of the property.

In our research we hypothesized to buy a used property at a price of € 200,000, taking advantage of the tax breaks that the law allows to apply to the first home.

Price declared value and cadastral income

The objective of our analysis is to understand how Italy is positioned in terms of ancillary costs related to the purchase of a first home.

Before starting, a clarification is necessary: ​​a precise comparative calculation cannot be made because, unlike in other countries where taxes are paid on the selling price, in Italy taxes are calculated on the cadastral income.

In the past, even in Italy, people paid on the “declared” price of the sale, but tax evasion meant that the terms were redefined.

The costs for the purchase of the first home in Italy

Here is the list of the main costs related to the purchase of a used home (not subject to VAT and used as a main residence).

  1. Registration tax;
  2. Archive fee;
  3. mortgage tax;
  4. cadastral tax;
  5. notary fees;
  6. contribution from Cassa Nazionale Notariato, CNN, tax advising;
  7. inquiries;

The registration tax is set at 2% of the revalued cadastral income. The archive tax is governed by the Decree of November 27, 2012, n.265 and has a fixed cost of € 39. Mortgage tax and cadastral tax are instead set at € 50 each.

The cost of the notary for the purchase of a property

Is the cost of the notary the thing that worries you most? Let’s see in detail how much the notary fees for the purchase of the first home can amount.

The notary fee is calculated on the basis of the sale price and defined on the basis of the brackets indicated by the Notary.

Let’s take an example: for a sale of € 200,000, the notary’s fee is between 0.75% and 1.10% and therefore an average fee of € 1,650.

This range allows notaries to have a minimum of discretion when proposing a quote. The contribution from Cassa Nazionale Notariato, CNN, Tax Advice are items related to the notarial fee.

Finally, we find the inspection costs which are on average fixed and to the extent of about € 100.

The costs of registration tax, archival tax, mortgage tax and cadastral tax are not subject to VAT as they are prepaid expenses on behalf of the customer and excluded from the tax base pursuant to Article 15, paragraph 1.3 Presidential Decree 633/72, while honorary, CNN fees, advises and inquiries are subject to VAT of 22%.

What is the “Tax Credit”?

The tax credit deserves a special mention, which very often buyers do not know and the professionals involved forget to mention.

In fact, it is possible to take advantage of this credit which totally or partially reduces the registration tax in the event of purchase following the sale of a property used as a first home.

Mediation and real estate agency costs

Usually, for various reasons, those who want to sell or buy a house rely on a real estate agency. The mediation work has a cost in the event that the operation is successful and we are therefore talking about a commission that is usually around 3%.

Read also the Tips for selling a house through an agency.

In our calculation of the costs for the purchase of the first home we did not want to take the percentage into consideration as new models are appearing in the European panorama, which reduces this cost through the industrialization of the sales process.

First home concessions and deductions

In Italy, there are concessions on the purchase of a first home for the private individual introduced by the 2016 Stability Law. If the transfer is subject to VAT, the facility leads to the application of a reduced rate of 4%, as well as the payment of registration, mortgage and cadastral tax (200 euros each), stamp duty, special cadastral taxes and mortgage fees.

If, on the other hand, he is not subject to VAT, the concession consists in the application of the proportional registration tax reduced by 2%, with a mortgage and cadastral tax of 50 euros each.

Finally, the deduction for the tax return allows you to deduct a maximum of € 4,000 per year, with a rate of 19%. While for a mortgage linked to construction or renovation, it drops to a maximum ceiling of € 2,582.28.

Notary fees are also deductible, but with some important limitations. The costs subject to tax benefit include only the notary’s fee for signing the loan agreement.

The possibility of deducting the costs incurred for the deed of sale itself and any charges associated with the registration or cancellation of the mortgage or those incurred by the notary on behalf of the same customer is excluded.

All this obviously implies that notary fees can be deducted only in certain conditions, an example: in the case of a loan agreement for the purchase of a property.

As previously mentioned, the tax benefit is 19% with a deductible amount that cannot exceed 4,000 euros. In practice, the buyer will be able to receive a maximum refund of 760 euros.

Mortgage-related house taxes

The costs for the purchase of the first home not only linked only to the price of the purchase to be paid off but in the case of a mortgage also to all the ancillary costs related to it and so on for all the professionals, you will have to call to conclude the agreement. In particular, we are talking about notary fees, which we have already talked about, stamp duty, the preliminary phase and possibly insurance policies.

The substitute tax is equal to 0.25% of the disbursed capital, but if a financial loan has been requested (based on law no. 191/04), the mortgage tax is required for a value of 2% of the mortgage registration amount. In addition to paying the registration tax which is equivalent to 0.50% of the latter.

Another expense item to consider is the insurance premium to be paid for the protection of the purchased goods. ‘ fire insurance is required compulsorily and its total cost depends on the value and duration of the mortgage.

The policy can be started by the lender, which will charge it in the opening costs in a single installment, or by paying the amount in installments. Sometimes it can also happen that the bank invites the loan applicant to take out life insurance, but this varies according to age, sex and duration of the policy.

The costs associated with the purchase of a property in Europe

So far we have only talked about the Italian scene, but what are the costs if you buy a house in another European country? What are the concessions for buying a house in Germany or the taxes to buy in Portugal?

We compared 9 countries where property regulations are similar. As mentioned above, for Italy the registration taxes have been calculated on the sale price, but since the tax base (the updated cadastral income) is almost always lower than the sale price, this figure is overestimated.

The first place in Europe is Luxembourg which has notaries with low stipulation costs and subsidized taxation for the main residence that is the envy of all.

Thanks to the Bëllegen Akt a buyer is entitled to a tax credit of € 20,000 which becomes € 40,000 if a couple is buying: when it is possible to apply the Bëllegen Akt, the registration fee has a fixed amount of € 100.

The study shows that  Italian notary fees are among the lowest in Europe, third after Spain and Portugal. It should be noted that in the United Kingdom we have replaced the notary’s fee with the professional service of the lawyer signing the contract.

The ranking of the purchase costs of the first home

Also on the registration tax front, taking into account that it is calculated on the revalued annuity and of the tax credit, buying in Italy as a first home is advantageous compared to the rest of Europe.