The Cost of Buying a Property
Understand the taxes, fees and mortgage costs involved in buying property in Brazil...
There are a number of different costs involved when purchasing real estate in Brazil.
Fees and Taxes
The following fees and taxes must be paid by the seller:
- Real estate brokerage fees: normally 5 percent of the market value of the property (dictated by the agreement between the parties)
- Urban and rural real estate brokerage fees: between 5 percent and 10 percent of the total property value
- Real estate fees for properties in construction: between 5 percent and 8 percent
The buyer usually pays transfer-related costs, which include:
- ITBI (Imposto de Transmissão de Bens Imóveis). This transfer tax is a municipal tax on transfers of real estate and rights to real estate. The amount varies from city to city: the average cost is three percent of the market value of the property, but can be higher. It is paid to the City Hall (Prefeitura)
- ITCMD (Imposto Sobre Transmissão Causa Mortis e Doação). State tax on transfers of goods on death-related inventories or donations of real estate. The amount varies from city to city, the average cost is four percent of the market value of the property, but can be higher. It is paid to the City Hall (Prefeitura)
- Costs of executing and registering the deed (between R$700 and R$800, for real estate valued between R$100,000 and R$150,000). It is paid to the Real Estate Registration Notary's Office
- Real Estate Accounting Tax is approximately R$800 for real estate valued between R$100,000 and R$150,000. It is paid to the Notary's Office (responsible for authenticating the purchase papers)
- Navy Alienation Fee. This fee is charged by the federal government for transactions involving real estate located on the coastline or up to 80 meters away from the coastline. It amounts to five percent of the total real estate value
- Municipal Alienation Fee. Some City Halls also charge alienation fees for real estate located in certain municipal areas. This fee is, on average, two percent of the total real estate value
- Bank Fees. If the real estate is acquired through bank financing, the buyer must also be prepared to pay the fees charged by the financial institution, such as real estate evaluation taxes, administrative taxes, credit-opening taxes, real estate insurance and life insurance
Mortgages and Financing the Purchase
Buyers who do not have all the cash to make a purchase have a number of alternatives available, including financing the purchase through a financial institution or directly with the building company. The word for mortgage in Brazilian Portuguese is Hipoteca.
Only foreigners who are permanent residents and have a proven income salary can apply for mortgages in Brazil. The main real estate financing agency in Brazil is Caixa Economical Federal, a government-owned bank.
Private banks providing mortgages include: Bradesco, Santander, Banco Itaú and HSBC. There is a big variation in loan conditions on offer so it is suggested to compare offers. Not all banks offer financing for those who live abroad.
Direct financing by the building company
Building companies usually offer up to 60 months of financing during the construction phase. As it is a direct purchase, there can be broader negotiation options and it is easier to set values and deadlines. The buyer can pay in any number of installments, often without interest rates.
Installments will be readjusted by the Civil Construction National Index (INCC). When construction is finished, the interest rates will be 12 percent per year, readjusted by the Market Prices General Index (IGPM).
As well as an initial installment of about 10 to 12 percent of the final real estate price, there are also intermediary installments, which will be much higher than monthly installments.
- Brazilian Institute of Real Estate Officers (Instituto dos Registradores Imobiliários do Brasil - IRIB)
- Brazilian Association of Notaries and Public Registrars (Associação dos Notários e Registradores do Brasil - ANOREG)