Acquiring your own property is undeniably one of the most significant and thrilling steps in life. Your new home not only brings excitement but can also provide you with a sense of security and long-term financial stability. However, amidst the euphoria, it's crucial to remember that purchasing a home is not solely about the property's price. There are several expenses and taxes that come with it, and they should not be underestimated. Being well-prepared in advance is always the wisest approach to avoid unpleasant surprises.
In this blog article, we will delve into the various expenses and taxes associated with buying a property in great detail. We aim to provide you with valuable insights to help you meticulously plan your budget and steer clear of unforeseen costs that may crop up on your journey to your dream home.
The property transfer taxes
Local property tax
When buying a property, one of the first expenses to consider is the local property tax to the municipality. The amount of this tax is typically determined as a percentage, ranging from 0.1% to 3% of the **property's assessed value/selling price, and it can vary depending on the property's location.
As of November 2023, for the cities of Burgas, Sofia, Plovdiv, and Varna, the local property tax is set at *3% of the assessed value.
*Tax rates are subject to change by the respective municipal council, so always check the current rate before entering into a transaction.
**The value of the local property tax is calculated based on the higher of the two values.
Registration agency fee
The fee for registering the new notarial deed is calculated based on the property's price. Unlike the local property tax, which is determined individually by each municipality, the fee to the registration agency has a fixed value across the entire country.
Its amount is 0.1% of the selling price but not less than 10 BGN.
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Another expense to consider when buying property is the notarial fee. The notarial fee is based on the property's price as stated in the notarial deed, as well as the notary fee tariff. Typically, its amount ranges between 0.6% and 1% of the material interest in the transaction.
It's important to note that if there is a discrepancy between the property's assessed value and its selling price, the higher amount is used to determine the fee, which also includes a 20% VAT charge.
The notarial fees in Bulgaria for registering transactions involving both movable and immovable property, according to the Notary Fees Tariff of the Notaries and Notarial Activities Act, are as follows:
up to 100 BGN
101 - 1000 BGN
30 BGN + 1,5 percent for the excess over 100 BGN
1001 - 10 000 BGN
43,50 BGN + 1,3 percent for the excess over 1000 BGN
10 001 - 50 000 BGN
160,50 BGN + 0,8 percent for the excess over 10 000 BGN
50 001 - 100 000 BGN
480,50 BGN + 0,5 percent for the excess over 50 000 BGN
100 001 - 500 000 BGN
730,50 BGN + 0,2 percent for the excess over 100 000 BGN
over 500 000 BGN
1530,50 BGN + 0,1 percent for the excess over 500 000 BGN., but not more than 6000 BGN
Example: If you are buying a property in the city of Burgas for 200,000 Bulgarian Leva, you will owe the following fees:
Municipal tax in the amount of 6,000 BGN (3% of the property's value for the city of Burgas)
The registration fee in the Registry of Immovable Property in the amount of 200 BGN (0.1% of the property's value)
The notarial fee in the amount of 1,356.6 BGN (730.50 BGN + (100,000 - 0.2%) * 1.2)
Total: 7,556.6 BGN.
In the case of financing the property purchase through a mortgage loan, it is necessary to consider the accompanying bank expenses.
The first expense that the client covers when taking out a mortgage loan is for the appraisal of the property, which is conducted by a licensed appraiser. The cost typically varies between 120 and 400 BGN with VAT.
Costs for Additional Banking Services
In some cases, when obtaining a mortgage loan, the bank may require you to take advantage of additional products, the use of which is accompanied by monthly or one-time fees. Such additional services may include salary transfers through the bank, account maintenance fees, life insurance, property insurance, and others.
- most commonly, the insured amount equals the loan amount and covers the entire loan period, with premiums that can be fixed for the entire duration or recalculated, typically on an annual basis, so that the installment amounts decrease over time.
- the property insurance fee is paid annually and typically ranges between 0.10% and 0.14%. In some banks, it is calculated based on the loan amount, while in others, it is based on the property's value.
Loan Processing Fee
The fee is determined by the bank's tariff and can be a fixed amount between 60 and 100 BGN, while for some banks, it is around 0.25% of the loan amount. It's important to note that the processing fee is paid after the loan is approved.
Commission to the Broker/Real Estate Agent
In the case of using a broker's services when purchasing a property, it's important to account for the commission. Most often, it amounts to 3% of the selling price, excluding VAT.
Other expenses to consider before proceeding with a purchase include:
Maintenance fee, if the property we wish to buy is in a gated complex; Costs for renovations and furnishings; Expense for purchasing a parking space.
In conclusion, buying a property is a significant step, and proper expense management is of crucial importance. While the focus is often on choosing the ideal home or the best investment, we should not overlook the importance of correctly managing the costs associated with buying the property.
In this article, we have examined the various types of expenses and fees typically associated with real estate purchases, including municipal taxes, bank fees, and additional services. It is important to prepare a detailed budget and include all these expenses to avoid unpleasant surprises.
Also, always keep in mind that tax rates may change over time and are directly dependent on the property's location. Therefore, it is good practice to check them before finalizing the deal.
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