October 2020
8 TIPS WHEN BUYING A PROPERTY IN PORTUGAL
You have long been drawn to the good life in Portugal and you are considering buying a house here, or you are looking for a good investment opportunity in the Portuguese real estate market. In any of these scenarios there are things to have in mind that are crucial in order to avoid unpleasant surprises.
Here are some tips from Kleya to buy smart while keeping your peace of mind!
Before you start looking for a property, it is important to set a budget!
If you’re considering requesting a bank loan, it is important to get in contact with some banks so that they can evaluate a maximum amount that could be granted to you, and whether the budget you idealized is realistic or not.
Keep in mind that the loan is linked to the property’s value. Therefore, it will only be possible for the bank to give you a simulation of the loan after the property has been chosen and evaluated. The loan percentage varies according to your financial possibilities and according to the properties’ evaluation, on average the down payment is between 20% and 35% of the total value of the loan, sometimes it is possible to pay a minimum of 10%.
In any case, and even if you had considered purchasing the property with your own capital (liquidity vs financing rate), feel free to consider, and compare, all offers from financial institutions to make the most beneficial choice for you.
Don't forget to take into account the taxes related to the purchase of a property in Portugal, such as the IMT, and the stamp tax, you can access this simulator to have an idea of this taxes cost.
There are several factors that will make a place a prime location for a property.
So, take your time and do a little investigation on the neighborhood, visit it at different times of the day, talk with the locals, etc... The location will determine the environment in which you will live, what you can do there, where you can buy groceries and how the traffic is to get to work and back home.
You will soon find that a location is the number 1 factor that sets the value of a property. It's the same for an apartment, land or any other property.
Whether it's a property to live in or to make an investment, it is imperative to choose the location carefully and in consensus with your lifestyle.
The perfect property doesn’t exist, there will always be the need to make one or more compromises regarding the property you have idealized. The first step is to make a list of the characteristics, as specific as possible on which you would be totally inflexible, and others that you are open to make a compromise. This way your Real Estate agent can present you with a list of qualified properties that will make the experience easier and less stressful.
When looking at advertisements in Portugal, take in mind that a T3 corresponds to a 3-bedroom house, if you see a T2+1 the property is made up of 2 bedrooms and that plus 1 can be a smaller than 9sqm room, a mezzanine, an attic, an underground room or even a room without a window.
As in all real estate markets, the Portuguese market has particularities in terms of constructions, finishing touches, equipment and architecture amongst others.
That is why, when purchasing a property in Portugal, it is important to be accompanied by a trusted specialist, who can clearly highlight the positive and negative aspects of the neighborhood and the property, and thus advise you best when buying.
During your visits, do not hesitate to clearly state what you think of the property in question, it will help the person accompanying you to identify the ideal property.
It is very important to check all the documentation of the property before initiating the buying process.
You need to know who is selling you the house and whether the person in question has the legitimacy to do so, and if there are any debts, mortgages, debts that are related to the house.
Also check the condominium accounting to make sure that there are no debts related to the house and the deeds of the last condominium meetings to check if works are already planned and that could be of your responsibility.
Analyze the energy certificate of the property. This document is an indicator of the expenses you will have in terms of energy consumption in your home to provide you with an adequate level of comfort.
Another precaution to take when buying a property is to analyze the house blueprint. In case of refurbishment or added construction, check with the city council to make sure everything is legal and if you have a housing permit.
In Portugal the asking price of a house is always related to the GCA ( Gross Construction Area) and the logic is you are buying a house, but also the walls.
The evaluation of the property allows you to know if the asked price is in line with the values of the current market, thus allowing you to negotiate more wisely.
In the case of a bank loan, this assessment is mandatory and made by an independent expert.
The real estate assessment allows the financial institution to know the value of a house and grant the home loan, but it also allows to validate the down payment amount. This assessment is a cost that you will have to bear from the beginning whether you buy the property or not.
The next step is to sign a Promissory Contract (CPCV), which describes the assets, equipment, suspension and termination clauses, deadlines for handing over documents and the execution of the deed.
It is planned to pay a down payment, negotiated between the parties, which will range from to 20% or 35% of the purchase price. If the purchase is done via bank loan this percentage will be discounted from your down payment.
The time to execute the final deed depends on the agreement between the two parties, it is advisable, especially in cases where a loan is necessary, to leave a deadline between 30 and 60 days, for your security, do not hesitate to stipulate a clause that allows you to extend this period without further penalty.
Be aware that, in accordance with the law, there is no obligation to return the sums in the event of a withdrawal, except under specifics conditions stipulated in the contract.
At last, the final step to purchasing your new home!
It will be signed in the presence of a notary appointed by the bank, when there is bank financing or simply by the parties concerned, that may be accompanied by their lawyer or consultant.
Before this signature all documents of the property will have to be analyzed, and grouped together, to be presented the day of the signing of the deed, so that the transaction can be made.
On the same day, the amount of the remaining is paid by banks cheque, in addition to the payment of the Transitional Municipal Tax (IMT), stamp tax, registration and legal fees.
After the deed is signed, you will receive the keys to your new home! The notary will handle the official registration at the registration office and with the fiscal authorities.
Congratulations! You are now a happy owner in Portugal, and it is time to enjoy the excellent quality of life that our country as to offers.
If you need help investing in real estate in Portugal, you can always count on the Kleya’s advice!
You can always request a contact or contact your Kleya consultant directly!