Before venturing to buy house you should reflect well and ponder the pros and cons. Even more if it is your first purchase! Based on my experience, I have selected a set of tips and advice that you may find useful.
For many this is the purchase of a lifetime. The purchase price of a home is usually high and implies a high investment whose amortization can extend up to 20 or 30 years. It's too long to make mistakes in choosing the right house.
Buy or lease house?
This is the first question many ask themselves. Derived from the shortage of houses available for rent, buying a home is often the chosen alternative. If we look only at the financial aspect, we can verify that:
The rent implies a monthly installment to be paid to the landlord on a property that will never be the tenant. In the background it is a payment related to the housing service, without any other gain.
Alternatively, if you choose to buy a house with credit, you will also be paying a benefit to the bank, which is usually lower than the income of a house, derived from the typically low values of interest rates, this is the situation habitual.
Credit financing
It is clear that the ideal is to buy the house with equity, but this is not an option for most of the Portuguese. The credit offers are many and vary from bank to bank, you can turn to the account manager of your bank and request a simulation. Although the ideal is to ask the same to more than one bank. Do not forget, ideally your effort rate should not exceed 33%. Try to negotiate the spread rate as this is the only component of the interest rate that you can lower. There are significant differences between banks. The domiciliation of salary, insurance contact and credit cards are factors that weigh on the spread rate that the bank has to offer you. The maximum period should not exceed 30 years. Pay attention to credit offers that have significantly lower values in the first few years and then go up significantly in the following years.
Negotiate, a plan in which the debt repayment component has a constant percentage over time.Sometimes the banks present a more favorable plan in the first years at the expense of an unfavorable counterpart: the provision in those years serves almost totally to pay interest. If you later decide to sell the home, you will have the unpleasant surprise of still owing almost the entirety of the initial loan amount. The ECB and the Banco de Portugal are more demanding than ever before and prevent housing loans with high effort rates and limit the value of the loan to 85% compared to the value of the home they intend to buy (they rarely reach the legal maximum of 90% ). Consider raising the initial entry to reduce the total loan amount. The lower this value the better the conditions the bank will have to offer you.
However you always have the possibility to use a credit specialist who through pre-negotiated partnerships can negotiate for you and present the best proposal taking into account your financial profile. At KW Sol we facilitate this process through an own department that has agreements with most banks and can present the best credit plan. All this without paying a euro whatsoever!