The COVID crisis has changed many people’s preferences; many are looking for a home in the suburbs of large cities while others prefer to live in the city center. Before we do the transaction it is recomendable to study the situation of the real-estate market, specifically the evolution of prices, cause it may be wiser to wait. The best option is to sell first, cancel the mortgage in case we have one, and ask for a new mortgage loan to buy the new property
If we have a healthy economy, we may also ask for a new mortgage loan and carry both expenses at the same time, until the final selling of the property.
Another option is what we call “bridge loan”, which allows to switch from one property to the other without selling the first one and without any backup savings.
Finally, there is the option to negotiate with the bank a subrogation, which allows the mortgage to be transfer to the new owner.
If I don’t have a mortgage from my previous home, it is best to sell first or to wait until we find a new price?
It will be ideal to be able to do it all at the same time, that is, looking for you next home while looking also for a buyer for your old one.
To achieve this, we recommend to agree on a period of 4 to 6 months between the signing of the deposit contract and the final selling of the property. This way, you will have peace of mind until you can find a buyer and you will also have enough time to find the right home and to do any renovations in case they are necessary.
If this is not an option, but you have enough savings (to pay for the 20%of the value of the property +10% of the expenses) you may ask for a mortgage loan and once the sale on the actual home is final, clear the pending debt.
How to correctly plan the sale of your homes?
The sale of a property requires a planificación that includes factors like the searching of a good middle-man that helps and advises along the process, the posible renovations that will help to add value to the property (without raising the price too much) and the gathering of all the information and documentation that the client may require. Property floor plans, property deed, certificate from the owners community, energy certification, first occupancy certificate, ITE certificate, last IBI receipt, certificate of the outstanding balance of the mortgage or certificate of 0 balance and the last utility bills.
How does the sale of the home affects the IPRF tax return?
Since it is a reinvesting case of the actual home, cause part or the entire amount from the sale of the regular home is used to buy the new property, no taxes will be paid as long as the money is reinvested on the new property.
In the case that the amount reinvested in the buying is less than than the amount received on the sale, only the proportional part obtained from the sale that corresponds with the amount used to buy the new home will be excluded from taxation.
Other expenses at the time of selling and buying a new home
In addition to the tax deductible from the buying-selling, there are other expenses that should be kept on mind before beginning the transaction process:
Municipal capital gain tax: It is different for each municipality (city hall) and it is calculated according to the increase in the value of the property during the time you owned the estate. Deed expenses at the time of selling the estate; coming from the possible settlement of the mortgage loan in progress. Realtors commission. Expenses resulting from the ordering of the different certificates and information related to the property to be transferred
New home buying expenses: We will have to pay for the property transfer tax on the purchase of the property (ITP, AJD or IVA) New mortgage loan if needed. Notary and agency expenses. Moving and renovation expenses if need it.
The best way to avoid any mistakes, it is to consult with a real-estate professional that will offer you the correct advise and give you the necessary information to carry out the sale and purchase successfully
This is specially important when there is an urgent need to change properties.
We are available for any clarification. Good luck!
