What Fees Are Involved When Buying Property?

[Reyed Mia (Apprentice, DIU)]

What Fees Are Involved When Buying Property?

There are hidden fees when buying a house that you may not have considered when first entering the property market. As well as the cost of the property itself, what other fees and taxes are you likely to face?

This article is only a general guide to help you get your finances ready. Always take into consideration that the total cost of purchasing a home will differ depending on the circumstances of the sale, and how you are financing your home. For this reason, it is very important that you seek the advice of professionals, such as licensed brokers, accountants, or even a lawyer.

Besides the actual purchase price, the following are the fees and taxes that you as a buyer must also sort out:

Documentary Stamps Tax
Transfer Tax
Registration Fee
Notarial Fees
Loan Fees

Documentary Stamps Tax

The Documentary Stamps Tax (DST) is a type of tax levied on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, sale, or transfer of an obligation, right, or property. In the case of a sale, a transfer of a real property, or a Deed of Absolute Sale, the tax rate is 1.5 percent or PHP 15.00 for every PHP 1,000.00 of the property's selling price, zonal value, fair market value, or whichever is higher.

Transfer Tax

This is a tax imposed on any mode of transferring the ownership of a real property, either through sale, donation, or barter. The transfer tax rate varies from a low of 0.5 percent to a high of 0.75 percent of the zonal value or selling price of the property, whichever is higher and depending on the municipality where the property is located. To determine the exact amount, the buyer should consult with the City or Municipal Treasurer.

Registration Fee

This fee is paid for the registration of a Deed of Absolute Sale, conveyance, transfer, exchange, partition, or donation of a real property. It is paid to the local Registry of Deeds or Land Registration Authority where the property is located.

To make the calculation simple, let's use PHP 1.7 million as the property's selling price, an amount that incurs a registration fee of PHP 8,796. However, if the property's selling price exceeds Php1.7 million—for example, PHP 2 million — the buyer will add PHP 90 for every PHP 20,000 in excess of PHP 1.7 million. Hence, the Registration Fee for a property worth PHP 2 million will be PHP 10,146.

Notarial Fees

The Deed of Absolute Sale should be also notarized, which requires a fee of about 0.1 to 0.15 percent of the property's selling price.

Loan Fees

Lastly, if the buyer applies for a housing loan, there are extra costs tied to it, such as an appraisal fee, handling fee, mortgage redemption insurance, and fire insurance. This depends on the bank or lender, so make sure to shop around to find out who offers the best rate.

http://www.lamudi.com.ph/journal/qa-fees-involved-buying-property/