Buying a house in Portugal or elsewhere is always an important moment in a family’s life but it is also a time for reflection and concern. Between knowing and collecting all the necessary documentation, applying for a mortgage from various banks and analyzing and comparing them can be very stressful. Ultimately, due to inexperience and even lack of knowledge of the subject, buyers end up making decisions that are not always the right ones.
On this page, you will find 5 things you should know before borrowing to buy a property in Portugal that may help you make the right choices.
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Real estate loans offered by banks
To put it simply, if you are already a customer of a Portuguese bank for various products such as a bank account, then you are already their customers. In case of a mortgage to buy in Portugal, the bank will not have to make big efforts to win you as a customer to win you as a customer. The consequence? The proposal will certainly not be the most interesting you could get.
It is therefore advisable to visit different Portuguese banks and compare the offers: mortgage fees, spreads, commissions, delays, other costs of the process of buying your home in Portugal.
This analysis and comparison is essential not only to choose the best proposal but also to negotiate it.
Spreading is not always the most important thing
For housing loans in general, the indicator that receives the most attention is the gap. And this is an important point, it represents the interest that the bank will earn by granting you a loan, but there are other elements that you should analyse in the proposals presented to you.
We are living in a time when spreads are very low, reaching 1%. The bank will therefore certainly try to compensate by selling you other products, such as life and multi-risk insurance, credit cards or salary accounts, among others.
For example, if you have an offer with a low margin but a life and property and casualty insurance with a very high value, this could compensate you for an offer from another bank with a higher margin and a lower insurance, even if the value of these tends to deteriorate over the course of your life. Therefore, different types of comparisons must be made.
Real estate loan in one bank, insurance in another!
The general idea is that the bank that provides the mortgage in Portugal should be the same as the one that provides you with life and property insurance. These insurances are a mandatory requirement for banks because they are the guarantee against the risk associated with real estate loans, since the values of this type of financing are always high.
However, it is not mandatory to take out life and property and casualty insurance in the same bank where you take out the loan. Insurance premiums can become as high as the mortgage itself. You should therefore carefully assess the various assumptions, both inside and outside your bank, regarding life and property and casualty insurance. Only in this way will you get an idea of the most advantageous option for your situation.
Loan for Portuguese real estate purchase: documents required
The process of financing a house in Portugal is quite bureaucratic, divided into several steps, in which different documents are required.
- In a credit analysis and pre-approval phase, you can expect to be asked for documents such as the income statement, identification document or Banco de Portugal’s (BOP) liability card, among others.
- In the next step, the valuation of the Portuguese property, you will be asked to provide documents such as a land register or a plan of the property.
- Finally, at the time of approval and marking of the deed, you will certainly need to provide documents such as an energy certificate, a user licence or an approved construction project, for example.
In order to be more efficient in collecting all the documentation, it is preferable to ask at the beginning of your real estate purchase process in Portugal, for a list of all the documents you will need in the different phases. This will help you avoid waiting times for documents and therefore delays in financing your new home.
Portuguese real estate purchase: costs after borrowing
The amount you will pay to buy your home in Portugal is not only the amount you pay to the seller. When buying a home, you must rely on expenses such as LMI, stamp duties and deed fees, among others.
Thereafter, you should not neglect other expenses that will have a significant impact on the management of your family’s long-term budget, such as IMI, condominium fees, property maintenance or capital gains taxes, if they exist.
It is necessary that you take into account the costs of the entire real estate purchase process, including:
- The taxes
- The costs of home loans
- The taxes
- Expenses to consider after the real estate purchase
Information, request and analysis of the various housing loan proposals are the watchwords for choosing the best credit option and will certainly help you maintain the health of your personal and family finances.
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