Choice factors

Every home has a soul that we are always able to feel and understand if it matches our own. However, there are factors that can help us make the decision, such as:

The dimension

Houses are advertised in m2 and number of rooms using the acronym t+number. The number always represents the number of rooms. From T0, without a room, which means a single room, up to t+n. T1, T2, T3, Tn.

Firstly, the size is related to the number of people in the family unit. Today we know that a family of 4 people should not live in less than 60 to 70m2 so that each member can have a minimum of their own space.

A one-bedroom apartment can work well for a young couple or a single person. However, if you work from home, be aware that you may need insulation and therefore a larger space or an additional room.

The location

The location has a cost, which is expressed both in terms of travel costs and its urban integration.

The cost of commuting between home and work must be calculated according to the time spent and the type of transport required. Often, the home-work-home circuit is complicated by the need to take children to school.

So do the math. And see if you can find the best house as close as possible to work and/or schools. The travel time between home and school is an important factor for academic success.

The cost of travel may justify paying a little more for the house.

However, there are other elements that can influence the choice of location.

The proximity to the beach if your hobby is surfing, the vast views that give us a greater perception of space, the balconies that put us in contact with the outside, the surrounding green spaces and even the amenities offered in modern developments, such as those of Criterion.

For young couples, the choice of location is often closely related to family support with a view to family growth.

The services

Living in isolation can be very peaceful, but it can make life difficult if there are no services nearby. In general, you have to use your car for everything you need on a daily basis, from buying bread in the morning to going to the hairdresser.

Checking whether the chosen house is well served by commercial spaces, whether it is close to health services and pharmacies, and services such as gyms or laundries, ends up being a dimension that can and should be valued according to your lifestyle.

The accesses

Easy access for everyday travel is always important, whether we need it in our daily lives or to maintain an active social life and to be able to enjoy the leisure and entertainment spaces in the city or in the new neighborhood in which we may choose to live.

Financing

The 1st rule is:

The investment required always exceeds the total value, as the value of taxes due and administrative processes must be added, which vary according to the value of the house.

The so-called effort rate. If your purchase is on credit, you must know that the amount to be spent monthly on installments cannot exceed 30% of your net monthly income.

For young people up to 35 years old and with tax residence in Portugal, the Portuguese State allows banks to lend up to 100% of the value of the first home as long as it does not exceed 450 thousand euros, as it provides credit institutions with a guarantee for this purpose.

The 2nd rule is:

Study the issues of interest rates and spreads in relation to loans in detail.

Spreads, the bank's margin on financing, can be negotiated and are related to both the risk and the set of other operations that it allocates to the bank.

Interest rates can be fixed, variable or mixed and are contracted for a specific period.

There are several factors that can influence your choice. The security of always knowing what you are going to pay, which is typical of fixed rates. The ability to withstand the inconstancy of variable rates that go up and down, depending on fluctuations in the Euribor rate and the interest rate trends determined by the European Central Bank. Or the mitigated risk of mixed rates that are fixed for a few years and then become variable.

In the case of bank financing, the value of the installments, which must be presented to you until the end of the loan, is made up of the interest value plus the spread value.

Two other elements to take into account when negotiating with the bank are: the duration of the loan, which is a maximum of 40 years, and the amount that you will or will not pay for early repayment, which may be in full or in parts to be defined.

The 3rd rule is:

Calculate carefully everything you have to spend to make the purchase.

Initial deposit: to reserve the house, a purchase and sale agreement is generally drawn up, with minimums established by the Bank of Portugal.

Criterion Portugal developments have a so-called “Family Friendly” rate that allows a down payment of just 5%.

Taxes

IMT - is a municipal tax on real estate transactions that varies between 0% and 8%, depending on some variables such as the value of the transaction, the location of the house (whether on the mainland or in the autonomous regions), the type of property and its purpose (first or second home).

The Government has decreed an exemption from IMT for young people up to 35 years old who purchase properties that fall within the 4th IMT bracket, i.e. €316,777, and “for properties above €316,772 and up to €633,453, the maximum exemption of the previous bracket is maintained, with no exemption for properties of a higher value”.

Stamp duty - this tax is levied on the value of the business – 0.8% - and on the financed amount – 0.6%.

Young people up to the age of 35 are also exempt from this tax, under the same conditions as those mentioned for IMT. For properties worth more than €316,772, the remaining tax amount is due.

IMI - This is not a tax to be paid straight away, but it is paid annually and its value is determined by each Municipal Council, so it must be included in your accounts. However, you may be exempt for the first 3 years depending on the taxable value (it cannot exceed 125 thousand euros Taxable Property Value).

If you have any doubts, you can and should clarify them with the bank chosen to finance you.

Administrative costs

Administrative costs include fees for registration of acquisitions, in particular the registration of loans and mortgages, in the case of applying for a loan, appraisal costs and procedural costs.

The bank or retailer can easily make these calculations and give you an estimate of what you will have to spend.

Young people up to the age of 35 are exempt from paying fees due for registering loans and mortgages for properties with a taxable value of up to €316,772.

At the Casa Pronta Counter you can find out about and process all registrations online.

Mandatory insurance

When purchasing any home, 2 insurance policies are mandatory:

• a life insurance policy that aims to cover the remaining amount of the loan in the event of the death or disability of the applicant
• multi-risk home insurance that covers damage to the property that is the subject of the financing

Insurance can be taken out through the bank or any other insurance company.

It is advisable to find out about the different offers on the market as they will increase your payment.

Required documents

The high number of documents required is not just bureaucracy. What is at stake here is the safeguarding of banks that are trying to assess your risk profile in order to decide on financing. Namely:

• Identification Document;
• Latest IRS Declaration;
• Income Statement;
• Declaration of contractual relationship (issued by the employer);
• Declaration of Commencement of Activity (if applicable);
• Green receipts for self-employed workers (from the last 6 months);
• Pay slips for employees (from the last 3 months);
• IRS Settlement Note from the previous year;
• Banco de Portugal's Responsibilities Map, which demonstrates your responsibilities as a creditor or guarantor;
• Proof of address;
• Bank statements (usually from the last 3 months);
• Proof of IBAN.

Regarding other stages of the process, such as registration, you will need identification documents, the housing license and the energy certificate, the latter two to be provided by the marketer or the owner of the property you are going to buy.

There are many bills, but this is the only way to ensure that you can make your planned purchase with complete peace of mind. Prevention is better than cure. Good luck.