Are there material costs associated with the creation of mortgages over real estate?

Real Estate (2nd edition)

Cayman Islands Small Flag Cayman Islands

See question 14 for a breakdown of stamp duty applicable to security interests over Cayman Islands real property. Registration fees are immaterial.

France Small Flag France

Creation and registration of a mortgage trigger:

  • notarial fees – a legally defined percentage of the secured receivable (e.g. for securing a loan financing a professional activity: 0.447% (VAT excluded) of the principal secured amount), subject to possible legally limited discount depending upon the amount of the secured receivable;
  • land registry tax (TPF) - 0.715% of the principal secured amount and of the ancillary secured amount (ancillary secured amount being usually between 5 and 15% of the principal secured amount and being contemplated to secure, among others, enforcement costs of the mortgage); and
  • other tax (CSI) – 0.05% of the principal secured amount and of the ancillary secured amount.

Certain real estate liens such as lender's liens trigger similar protection as mortgages, but are less expensive than mortgages (i.e. same costs, except for the 0.715% land registry tax (TPF)). Lender's lien can nevertheless only secure the loan receivable used to pay the acquisition price of the real estate asset. It shall be provided for in the underlying agreements (i.e. loan agreement and the sale deed) which shall therefore be drafted in French and governed by French law.

Registration of a lender's lien shall be made within 2 months of the date of on which the asset has been purchased and the registration will take effect as from such date.

Germany Small Flag Germany

Generally, mortgages and land charges must be notarised and typically will contain a clause submitting the property to immediate enforcement. Such a clause helps to shorten the enforcement process, because no prior court ruling on the underlying claim would be required (but the foreclosure procedure as such still needs to be carried out). Notarization of the lien and said enforcement clause will trigger notary fees.

In addition, registration (and later deletion) of the lien in the land register will trigger land register fees. A land charge or mortgage can either be certificated (i.e. a certificate will be issued by which the right can be assigned outside the land register by transfer of the certificate) or uncertificated (in which case it can only be transferred by registration of the new creditor in the land register). Many banks prefer a certified lien because it allows quicker transfer and gives more flexibility. However, issuance of the certificate results in additional costs.

There are no property or transfer taxes payable in relation to the creation of security over real property.

Hong Kong Small Flag Hong Kong

The registration fee of a mortgage interest is HK$230 if the interest being registered is valued at HK$750,000 or less, or HK$450 if the value exceeds HK$750,000. Mortgages must also be registered at the Companies Registry at a fee of HK$340. No stamp duty or other taxes is payable on mortgage creation or mortgage documents. No notarization fees are required as no notary public needs to ratify the mortgage.

Hungary Small Flag Hungary

There are a variety of fees and expenses payable in relation to the creation and registration of mortgages over real estate, including the fees of notarization, registration fees with the Land Registry, translation costs etc.

In typical cases the most relevant costs associated with the creation of real estate mortgages are the notary fees. Real estate mortgage agreements are in typical cases concluded in notarized form, which allows the secured creditor to avoid lengthy court procedures in the case of enforcement (see answer to Q19 above). The fees of the notary are defined by law and is calculated generally on the basis of the claim secured by the mortgage. Notarial fees typically amount to approx. EUR 3,000-5,000. However, it is expected that the notary fees will increase as from 1 January 2019 due to new legislation.

The registration costs of a real estate mortgage with the Land Registry are not significant (approx. EUR 40).

Spain Small Flag Spain

The formalisation and registration of mortgages with the Land Registry entails the payment of Notary and Land Registry fees and, more significantly, Stamp Duty.

Stamp Duty rates may vary from 0.5% to 2.5% depending on the location of the real estate asset, the tax base being the total amount secured by the mortgage (i.e. 120%-140% of the loan amount as a market standard).

India Small Flag India

Stamp duty will be payable on the mortgage instrument. In the state of Maharashtra, where possession is not given or agreed to be given under the mortgage, stamp duty is levied at the rate of 0.5% of the amount secured, subject to a maximum of Rupees 10 lakhs (INR 1,000,000). A reasonable registration fee is also payable.

Ireland Small Flag Ireland

No, only registration and filing fees. The registration fee in the PRA is are €50/€175 and the ROC fee for registering a charge under CA 2014 is €40.00.

Russia Small Flag Russia

The costs associated with the creation of mortgages are not significant. No notarization is required, and the fee for registering the mortgage with the public register is only RUB 4,000 (approximately EUR 55).

Switzerland Small Flag Switzerland

The costs, including taxes, notary and registration fees, in respect of the creation of a mortgage over real estate varies from one Canton to another, but are substantial. They are generally between 0.5% to 2% of the amount of the face value of the mortgage.

United Kingdom Small Flag United Kingdom

There are a variety of fees and expenses payable in relation to the registration of mortgages with appropriate registries but as a general rule they are unlikely to be significant enough to affect how the transaction should be structured, e.g. Land Registry fees on a scale of up to £250 per property for the registration of a mortgage and a Companies House fee of £15 for online filing of a charge.

There are no notarisation requirements or property taxes payable in relation to the creation of security over real estate. SDLT is not payable on the creation of security over real estate.

United States Small Flag United States

It depends of the location of the property. Some states and municipalities impose a mortgage recording tax which is calculated as a percentage of the face amount of the mortgage and is paid by the borrower (see Q14). In all cases, in addition to its own costs, a borrower will be responsible for the lender's title insurance, legal fees, and due diligence costs as well as a de minimis recording charge.

Peru Small Flag Peru

Yes. Notarial fees must be assumed for the execution of the public deed and the payment of the registry fees for the filing of the mortgage with the Public Registries.

Considering the private nature of notarial fees, they are not fixed, but rather usually depend on the property value and the tax amount. Registration fees are calculated on the basis of (approximately) USD 0.23 for each USD 300 of the value of the lien (applicable to acts amounting to a maximum value of up to USD 10,500) and S/. 0.45 for each USD 300 of the lien value (applicable to acts amounting to a value greater than USD 10,500), plus a rating fee of (approximately) USD 10.

Mexico Small Flag Mexico

Creation of mortgages over real estate involve notary public fees and legal fees, as well as Public Registry duties to record the public deed. These costs vary depending on the characteristics of the transaction and the place where the property is located.

Mortgages do not involve any tax payments, except for the applicable taxes on interests paid by debtors to creditors under the relevant loan that is secured by the mortgage.

Turkey Small Flag Turkey

The title deed fee (%0,455 of the contract value as for 2018), stamp tax (%0,948 as for 2018) and fix fee are compulsory material costs in creation of mortgage over real estate.

Italy Small Flag Italy

The creation of a mortgage over the real estate is subject to the Mortgage tax at the two percent rate.

With regard to the operations related to medium-long term credit facility agreements made by banks and other entities (e.g. undertakings for collective investments, insurance companies, etc.) it is possible to opt, in the same facility agreement, for the substitute tax at the ordinary rate of 0.25 percent on the amount of financing granted in each year or on the amount of funds given to open a credit line. The discipline of the substitute tax provides that the said operations related to medium-long term credit facility agreements (including the related guarantees) are exempt from the Mortgage tax, Registration tax, Cadastral tax, Stamp duties and Tax on governmental concession. In this case, the creation of a mortgage over the real estate would be exempt from mortgage tax at the two percent rate.

Cyprus Small Flag Cyprus

The loan agreement, the mortgage agreement and any other guarantee must be stamped at the tax Authorities. The stamp duty is estimated on the amount of the mortgage and is paid by the mortgagee. It is calculated as follows: when the amount of the mortgage is less than Euro5.000,00 no duty is paid. Duty of Euro1,5 for every 1000 euro on the first 170.000,00 euro is charged and for any amount above €170.000, the duty raises to Euro2 for every thousand euro. The stamp duty does not exceed the amount of Euro20.000,00.

When the mortgage is registered at the land registry, mortgage fees are payable which are the 1% of the mortgage amount.

Japan Small Flag Japan

The main cost of the creation of a mortgage is the registration and license tax. Registration and license tax is 0.4% of the secured loan amount. On the other hand, the lodgement of a mere provisional registration costs only JPY 1,000 for each item of real property. In addition, stamp taxes apply and lawyer fees will be incurred.

Updated: December 12, 2018