How to avoid spending more than you need in the purchase of a house
- Choose the right time to buy
Before buying a house, always take into consideration the economic context and the state of the real estate market. Analyze if the prices are going up or down and how are the EURIBOR (Euro Interbank Offered Rate) rates and the spread of different bank entities.
It is important to know well all particularities of the interest rates. The EURIBOR can be an interesting choice if it is low but it is always susceptible to market fluctuations. If you want to avoid any surprises, then maybe it is best to choose a fixed rate.
There are three factors that can influence the market prices and can help you decide.
Little offer of properties
The number of licensed buildings and apartments that are ready to move is half of the numbers of 2008. On one hand, if the demand for properties has increased, on the other, supply has decreased and this scenery is resulting in price growth.
The real estate prices are higher than banking estimates
In practice, that means that the banks are financing a property that is being sold at a higher price than what was evaluated for. As a result, if you are looking to buy a house, make sure that the seller has not incremented the asking price above the bank evaluation, or that your bank is willing to finance that extra cost.
Foreign demand can diminish the supply even more
The rise in property prices, especially in Lisbon and Oporto, has been in part driven by the growing demand of tourists and the foreign community. If this demand drops, it can have harmful consequences for the Portuguese real estate market as a whole.
However, there are no indicators that point to a reduction in demand from foreign buyers. Portugal is still one of the cheapest countries to acquire properties in Europe and, outside the cities of Lisbon and Oporto, the houses are still at affordable prices.
2. Know more about purchase incentives
Find out about purchase incentive programs that may exist to support property purchase. Check if there are measures that encourage property acquisition in interior areas of the country and evaluate if that is a viable option for you.
3. Be patient
Buying a house is definitely like buying an extension of ourselves. It is necessary to really weigh things out and simulate different loans, visit several properties, find what you are really looking for, make proposals and wait for answers. During all this process it is necessary to keep calm and know when it is the right time to move forward.
4. Confirm all documents
Ask the seller for all the documents related to the property so you can check all the information on the tax and notary’s offices. This step can avoid lots of unpleasant surprises.
5. Check the available auctions
Auctions can be great business opportunities. You can find interesting properties at competitive prices and with financing options associated.
In what concerns the banking, these auctions are a way to dispose of properties that they own. These opportunities sometimes offer special financing conditions or a more attractive spread.
6. Set a budget and do all the math
Evaluate your budget the best way possible and consider if it’s enough to support all the necessary investment. The amount to pay for your loan cannot be higher than 20% of your monthly income and, in case you have other loans, the total amount of the monthly payments cannot be higher than that percentage.
To calculate your tax effort, you should divide your financial charges by the total net income of your household and multiply it by 100. There are banking institutions that recommend a maximum tax effort of 35% but it is better not to surpass 20%.
7. Don’t visit properties that you cannot buy
If you determined that the maximum you can spend in a house is 150.000€, why should you visit one that is worth 200.000€? That will only give you false hope, and you may end up liking a house that you will not be able to pay.
Besides, you cannot commit to the acquisition of a property without having a pre-approved loan, so you should first guarantee that you will be granted a loan.
8. Negotiate the offer
Sometimes buyers make the mistake of comparing the selling price of a house with others that they’ve seen. It is a mistake to compare prices between several houses since sellers can ask for any price they want. You should note that the asking price is not necessarily the final price of the property.
9. You can opt to buy a plot and a modular house
In Portugal, there are already companies specialized in the construction and implementation of modular houses. It is definitely one of the housing trends of the last years, with the main advantage of being fast constructions, with thermal insulation of high quality and more accessible in terms of price.
If you are thinking about acquiring a property, then our advice came just in time, uh? See here all the options we have available for you.