Buying a house is a huge step, perhaps one of the most significant in life. But we'd be lying if we said it didn't weigh on our wallets. Between taxes, the deed, commissions and insurance, there are a number of costs that accumulate long before you have the key in your hand.
To avoid being caught off guard, it's worth knowing what you're getting into and what to expect.
Initial down payment (equity)
If you're going to take out a mortgage, be aware that no bank will lend 100% of the value of the house (with the exception we'll see below). The maximum is usually 90% of the lower of the purchase price and the bank's valuation. In other words, you'll have to put down at least 10% of the value of the house and, if the valuation is lower than the purchase price, you'll have to cover that difference too.
100% loan for young people up to the age of 35
Since 2024, it has been possible to access 100% financing for young people up to the age of 35. This support, promoted by the state in partnership with banks, applies to the purchase of a first permanent home and has specific rules:
- The house cannot be worth more than the maximum amount defined for the type and area of the country
- The buyer cannot own another residential property
- The credit must be granted by banks that adhere to the government's protocol
- The bank appraisal is still decisive, even if the purchase price is higher, the bank will only finance up to 100% of the appraisal, not the market price.
Down payment in the CPCV (Promissory Contract of Purchase and Sale)
This contract is a kind of "formal reservation" of the property. Normally a down payment of 10% of the value of the house is given. This amount is then deducted from the final payment.
If you back out of the deal without justification, you lose the amount paid. If it's the seller who backs out, you have to pay back twice as much.
Bank commissions
If you're going to take out a mortgage, you can expect various commissions:
- Appraisal commission: around 250 to 300 euros;
- Study or process opening commission: around 300 to 400 euros;
- Documentation preparation commission: another 200 to 400 euros, depending on the bank.
Average total? Around 800 to 1,100 euros in initial fees.
Municipal Property Transfer Tax (IMT)
This is one of the biggest charges and applies every time you buy a house (with a few exceptions).
This tax is paid before the deed and is calculated based on the value of the deed or the Taxable Asset Value (the higher of the two). The tax rate depends on the type and value of the property and the purpose (owner-occupied or secondary).
If the house is for own and permanent habitation and costs up to 101,917 euros, there is total exemption on the mainland. Above that, the value varies according to brackets.
Here too, young people up to the age of 35 can count on extra help: exemption from IMT on the purchase of their first home up to 324,058 euros, and partial exemption up to 648,022 euros.
Stamp Duty (IS)
It is twofold:
- IS on the purchase of the house: a rate of 0.8% applies on the deed value or VPT (the highest);
- IS on mortgage loans: if you take out a loan, you pay 0.6% on the loan value (or 0.5% if the term is less than 5 years).
As with IMT, young people up to the age of 35 are also exempt from paying Stamp Duty on the purchase of a house if it is for their first permanent home.
Deed and registration
The purchase is formalized in the deed, and there are bills to pay there too. You can do this at a notary's office, with a lawyer or through the Casa Pronta service (simpler and cheaper).
- Casa Pronta (without credit): around 375 euros
- Casa Pronta (with credit): around 700 euros, because it includes registering the mortgage.
In notary offices or with lawyers, the amounts can vary significantly.
Municipal Property Tax (IMI)
This is an annual tax, paid to the municipality where the property is located. It is calculated on the Taxable Asset Value (VPT) and the rate is set by the local council.
- The rate usually varies between 0.3% and 0.45%;
- There is an exemption of up to three years for permanent dwellings with a VPT of up to 125,000 euros and household incomes below 153,300 euros.
Source: https://www.santander.pt/