10 Mistakes to Avoid Before Buying a Home
There are often overlooked details that are crucial to getting a good deal. CNN Portugal listened to a DECO financial market specialist and a person responsible for the real estate credit area and explains what you cannot fail to do when purchasing a property
Despite the war, the increase in interest rates and the Bank of Portugal rates, the real estate market continues to rise. In the first three months of the year alone, house prices in the country grew 12.9%. Considering the investment, whoever wants to buy a house, warn the experts, must pay attention to the details that can be decisive to make a good deal.
CNN Portugal spoke with Massimo Forte, a specialist in the real estate market, Elisabete Policarpo, a lawyer at Deco’s Financial Protection Office and João Melo, responsible for the housing credit area at ComparaJá, who explains the mistakes you should avoid, the details to be aware of. and the steps you can’t ignore.
Make an unrealistic assessment
When buying a house, there is a first step that must be taken safely, warns Deco lawyer Elisabete Policarpo: identify the weight that the purchase will have on the family budget. First of all, she says, anyone who wants to acquire a property cannot “forget that housing credit is long-term and will accompany you in various stages of life”.
Therefore, one of the mistakes is not making a realistic assessment right from the start. For this, it is necessary to analyze several factors, indicates the specialist. “The type of existing income, whether fixed or variable, such as responsibilities already contracted, the contractual evaluation, the initial liquidity for the formalization with the value (which must be adopted by the consumer so that the value is formalized) purchase) are not always evaluated by the buyer”, he warns.
On the other hand, it is important to understand with banks how interest rates and identify the benchmark of values that you can pay to look for a home. However, the Deco lawyer emphasizes, “it is important to consider that the amount of the financing made will depend on the value of the property valuation by the banking institution”.
Ignore some expenses
The truth is that in addition to the monthly mortgage payment amount (including the value of life insurance and insurance coverage), there are many other costs associated with buying a property. The real estate market specialist Massimo Forte recalls that the costs of registration, deeds, bank evaluation and the process and also the Municipal Tax on Onerous Property Transfers (IMT), a mandatory expense when buying a home .
Don’t have money for entry
“Since 2018, a banking institution has been able to finance more than 90% of the value of the acquisition deed or property valuation”, notes Deco’s lawyer Elisabete Policarpo, explaining that anyone who wants to buy a house has to verify that they have, for example, sufficient amounts for the so-called “down payment”.
Furthermore, by not financing 100% of the appraisal value of the property, the consumer, at most, 90% of the value of the deed of acquisition (or appraisal of the property), which means that buyers must difference.
Forget the effort rate
Any purchase implies an analysis of the family budget, but in the case of a property it is essential to always take into account the so-called Effort Rate. That is, the relationship between the net income of a household and its expenses.
With no savings from a bank, this fee has to be aggregated to the bank based on the proceeds of the case being paid to the bank. Deco’s lawyer indicates the simple calculations that you have to do to determine this value: the effort rate = [total de prestações / rendimento do agregado familiar] x 100). “The effort rate must be less than 35%”, warns Elisabete Policarpo.
Value the spread more than the APR
Knowing how to evaluate the various indicators can be decisive to pay when asking the bank for a value. According to João Melo, responsible for the housing credit area of the Compare Now, a company that simulates credit, it is important to pay attention not only to the bank – a fee that the bank charges the customer, in order to cover the costs it had and generate profit with the credit – but also to the APR. “It is an important percentage in credit proposals”, he says.
Explaining that the APR “encompasses not only the spread value, but we are also life and multi-risk insurance”, João Melo, who is the value of the APR that “translates to a good or bad proposal” . Therefore, he adds that there is no doubt that “one of the most common mistakes is disregarding the APR in favor of the spread, as it is a better-known term with greater disclosure by banks”.
Not evaluating in detail the state of the house
Another of the most local mistakes to see that you should avoid is not going to the state of the properties. Massimo Forte, a specialist in the real estate market, guarantees that it is essential to “visit the property” to avoid surprises. And he makes a suggestion: on one of the visits, be accompanied by a civil construction professional, an engineer or an architect to understand details that most people miss.
On the other hand, this assessment can help you to make a real assessment of the property and understand the costs that may be involved. At the same time, some elements that work in properties state can be used so that they are used to be used more.
Devalue the area of the property
When you want to buy a house, it is important to know an area where you are located. Therefore, Massimo Forte advises that, in addition to visiting the interior of the property, walk around the streets of the area where it is located. “You should always walk around the area, talk to the neighbors”, he suggests.
Another tip is to visit the different details that are not only discovered during the day – such as repairs – and others that are more at night – such as noise.
have missing documents
If you are sure you have found “the house”, it is urgent to ask for all the property’s documentation. According to the experts, there are documents that, sometimes, people forget to ask for, but they are essential for the business: the land register, the certificate of registry office and license of use. Afterwards, it is also recommended to check that everything is within the legal norms.
One of the most important documents, notes Massimo Forte, is the Promise of Purchase and Sale (CPCV). This document is mandatory and will serve to guarantee your position and the owner’s position on values, deadlines and other conditions related to the purchase of the property.
Do little research and have little information
“It will not carry out the market conditions applied by housing credit institutions is a big mistake”, defends a specialist from Deco Elisabete Policarpo. This step can make all the difference in the contractual conditions, such as the value of the monthly installment.
The expert adds that the consumer, as a rule, contracts the mortgage at the institution where he already has a business relationship, which is wrong. “Neither the bank nor the institution will be presented as the most important conditions for the conditions, without explaining the most difficult conditions”, without explaining the realization of several simulations in alert and analyzing the conditions in a way.
Compare offers with those of friends
Each case is different. It is to buy this premise that João Melo says that people forget at the time of many houses. “The bank proposals are specific to each client. A very common mistake is comparing how they did a recent project.”
According to the credit area of credit, there are other factors that help you compare the amount that the bank is willing to lend. “In addition to the characteristics of the clients (age, salary, expenses, charges and household), there are other factors such as the type of employment contract, the existence or not of a second holder or guarantors, and also the characteristics of the property. to acquire”.