Often overlooked are the details that are critical to getting a good deal. CNN Portugal listened to a real estate specialist, a lawyer from the DECO financial office and a person in charge of home loans, and explained what you can not do when you want to buy a property
Despite the war, the increase in interest rates and the forecasts of the Bank of Portugal, the real estate market continues to grow. Only in the first three months of the year housing prices in the country grew by 12.9%. Including investments, who wants to buy a houseexperts warn, it is necessary to pay attention to the details that can be decisive for closing a profitable deal.
CNN Portugal spoke with Massimo Forte, Real Estate Specialist, Elisabeth Policarpo, Lawyer at Deco Financial Protection Authority, and João Melo, Head of Home Lending at ComparaJá, who explain mistakes to avoid and details to be aware of. , and steps you can’t ignore.
Give an unrealistic estimate
When buying a home, there’s a first step that needs to be taken safely, warns Deco lawyer Elisabeth Policarpo: determining the weight the purchase will carry on the family budget. First of all, he says, anyone who wants to buy a property cannot “forget that a home loan is a long-term one and will accompany you through the different stages of life.”
Therefore, one of the mistakes is not to give a realistic assessment from the very beginning. To do this, it is necessary to analyze several factors, the specialist points out. “The type of income that exists, whether fixed or variable, the commitments already made, the estimate of the level of effort, the need for liquidity to match the original value, the signal (which must be taken by the consumer in order to formalize the bill of sale) is not always properly taken into account by the buyer” he warns.
On the other hand, it is important to understand the interest rates of the banks and determine the benchmark of the cost you can pay to find a home. However, Deco’s lawyer emphasizes, “it is important to bear in mind that the cost of financing will depend on the value of the property valuation carried out by the banking institution.”
Ignore some costs
The truth is that in addition to the monthly mortgage payment (including the cost of life insurance and multi-risk insurance), there are many other significant costs associated with buying a property. Real Estate Market Specialist Massimo Forte reminds you to take into account the costs of registration, documents, banking and process valuation, as well as the municipal burdensome transfer tax (IMT), a mandatory expense when buying a house.
No money to enter
“Since 2018, no banking institution has been able to finance more than 90% of the cost of a property acquisition or appraisal transaction,” notes Deco lawyer Elizabeth Policarpo, explaining that this means anyone who wants to buy a home to make sure they own them, for example, sufficient amounts for the so-called “advance payment”.
In addition, he states that by not financing 100% of the property’s appraised value, the consumer will receive no more than 90% of the value of the act of purchase (or the property’s appraisal), meaning that buyers must keep the difference.
Forget about the rate of effort
Any purchase involves an analysis of the family budget, but in the case of real estate, it is important to always take into account the so-called Effort Rate. That is, the ratio between a household’s net monthly income and its expenses.
In the case of a bank loan, this rate must be calculated based on the household income and the contributions to be paid to the bank. Lawyer Decaux points out the simple calculations that need to be done to determine this value: effort rate = [total de prestações / rendimento do agregado familiar] x 100). “The effort factor should be less than 35%,” warns Elisabeth Policarpo.
Value the spread more than the APR
The ability to analyze various indicators can be crucial in determining the payment amount when applying for a bank loan. According to Joao Melo, responsible for home loans in CompareJa, a company that imitates a bank loan, it is important to pay attention not only to the spread – the rate that the bank charges the client to cover the expenses that he had and make a profit with the loan – but also to the annual interest rate. “This is an important percentage in loan offers,” he says.
Explaining that the annual interest rate “includes not only the cost of the spread, but also all costs inherent in the loan, such as life insurance and multi-risk insurance”, João Melo ensures that it is the value of the annual interest rate that “translates whether we face we are with a good or bad suggestion”. Therefore, it is good to have no doubt that “one of the most common mistakes is to ignore the annual interest rate in favor of the spread, since it is a more well-known term and with more disclosure by banks.”
Without assessing in detail the condition of the house
Another of the most common mistakes to avoid is not visiting a property to see what condition the property is in. Massimo Forte, a specialist in the real estate market, ensures that it is necessary to “visit the property in person” to avoid surprises. And even leaves a proposal: on one of the visits, accompany a professional builder, engineer or architect to sort out the details that elude most people.
On the other hand, this appraisal can help you get a real assessment of the condition of the property and understand the possible costs. At the same time, some elements arising from the condition of the property can be used to make negotiations more profitable.
Depreciate real estate area
When you’re looking to buy a home, it’s important to know the area you’re in. Therefore, Massimo Forte advises, in addition to exploring the interior of the object, to walk along the streets of the area in which it is located. “You always need to walk around the territory, talk with neighbors,” he suggests.
Another tip: visit the area and the property at different times, because there are details that are only revealed during the day, such as the need for renovation, and others that are more noticeable at night, such as noise.
there are missing documents
If you are sure that you have found a “home”, you must urgently request all documents for the property. According to experts, there are documents that people sometimes forget to ask for, but they are necessary for business: a cadastral book, a certificate from the registry office and a license to use. After that, it is also advisable to check that everything is within legal limits with a professional.
One of the most important documents, notes Massimo Forte, is the Promise of Purchase and Sale (CPCV). This document is mandatory and serves as a guarantee of your position and the position of the owner regarding the cost, timing and other conditions associated with the purchase of real estate.
Do little research and have little information
“The big mistake is the lack of market research on the conditions applied by various institutions in the field of home loans,” defends Deco specialist Elisabeth Policarpo. This move could completely change the terms that will be included in the contract, such as the cost of a monthly payment.
The expert adds that the consumer, as a rule, takes out a mortgage in an institution where he already has a business relationship, which is wrong. “Your bank will not always be the institution that offers the most attractive terms, sometimes it will even be the one that presents the worst terms,” he warns, explaining the importance of running several simulations in different institutions and carefully analyzing the terms offered.
Compare offers with friends’ offers
Each case is individual. This is a premise that João Melo says that many people forget when buying a house. “The bank’s offers are individual for each client. A very common mistake is to compare the offers received with those of friends who have recently taken out a loan.”
According to ComparaJá, responsible for housing loans, apart from the profile, there are other factors that influence the amount a bank is willing to lend. “In addition to customer characteristics (age, salary, expenses, fees, and household), there are other factors such as the type of employment contract, the presence or absence of a second holder or guarantors, and what are the characteristics of the property being purchased.”