What mistakes should I avoid making when buying my first home?

If you don't know the different nuances involved in this process, you could make miscalculations or even bad decisions when it comes to choosing the best mortgage for you. But the good news is that you can avoid many of these mistakes if you know the procedures and what to do.

To help you make the best decisions when buying your first home, here are some of the mistakes you shouldn't make during this stage.


Getting pre-approved for a mortgage after you have chosen a property

When you decide that the time is right to buy your first home, it's normal to spend your free time looking for properties that meet your requirements. However, before you start visiting properties and finding your next home, it is essential that you have your mortgage pre-approved.

The pre-approval of a loan allows you to see if you are eligible for a loan, but also the maximum amount you can pay for a property. By knowing this value, you can save a lot of time by avoiding visiting properties that are not within your budget.

What's more, if your mortgage has already been pre-approved, your chances of getting a property increase. But the favorable odds don't end there. Imagine you want to buy a property that has been on the market for several months. With your pre-approved credit, you can make an offer below the amount the seller has set in exchange for closing the deal right then and there.

However, don't forget that before you go ahead with a home loan, you should analyze several offers in order to get the best deal on the market for you. But in order to identify them, don't just look at the lowest spread.

Although a low spread is an indicator that you have a good offer in hand, you should focus on the APR and the MTIC. These two indicators show the total amount you will pay for your loan, as they include the value of interest, commissions, related expenses and associated products, such as home loan life insurance and multi-risk insurance.


Analyzing the purchase of your first home based solely on the monthly payment

The process of buying and financing a house involves paying other charges in addition to your monthly credit installment. That's why, when you set a budget for buying a property, you need to count all the expenses from the beginning to the end of the process. Otherwise, you could be caught by surprise and not be able to meet these expenses.


If you're still not aware of the amounts involved, know that you will have to bear the costs associated with:

Bank commissions: In the course of a home loan process, the bank asks you to pay certain commissions, such as appraisal commissions, process study commissions, formalization commissions, among others.
The amounts of these commissions vary from bank to bank. But, as a rule, we're talking about a charge of around 800 and 100 euros.

Registration of the property: If you register the purchase of your house through the Casa Pronta service and it is associated with a mortgage, you will have a charge of 700 euros. This is a very practical solution for those wishing to register their property. This is because you can deal with all the procedures relating to the purchase and sale of a house at a single counter.

However, the costs increase considerably when you consider the taxes to be paid for buying a property and taking out a mortgage. After all, you will have to pay IMT (Municipal Tax on Tax Transactions), Stamp Duty on the purchase of your home and Stamp Duty on the mortgage loan.

In the case of IMT, there is no fixed amount applied to everyone. This tax varies depending on the nature of the property (whether it is urban or rural), its purpose (permanent home or second home), location (mainland Portugal or autonomous regions) and the value of the property.

For example, if you buy an urban property in mainland Portugal, for your own permanent home, with a value of 150,000 euros, the IMT is 1,803.37 euros. On top of this is the Stamp Duty on the acquisition (corresponding to 0.8% of the value of the property's deed). If the value of the deed is 150,000 euros, the stamp duty corresponds to 1200 euros. Stamp duty on mortgage loans, on the other hand, is 0.6% of the amount financed.

Don't forget that once the purchase process is complete, your family budget must be updated. After all, if you're not exempt, you'll have to pay IMI (Municipal Property Tax) and the condominium every year. If you want to know in advance how much you will pay in IMI, use the IMI Simulator.


Choosing a property without checking its documentation

Finally, one of the biggest mistakes people make when buying their first home is not checking the property's documents. When you buy a property without checking the Caderneta Predial Urbana and the Certidão Permanente, you run the risk of some unpleasant surprises.

For example, the house you want to buy may be attached to the bank or not have all the areas duly licensed. Another unpleasant situation is wanting to buy a property that doesn't have just one owner. In this case, the other owners may not agree to the sale.

So ask for all the documents in advance and find out more about the property you want to buy. In the case of the Caderneta Predial Urbana you can access information about the property's value, the registered areas and the owners of the house. In the Permanent Certificate you can find out about all the registrations made at the registry office and whether there are any liens or mortgages.

As for any condominium debts, the seller is currently obliged to submit a written declaration stating the amount of all condominium charges. This includes amounts relating to the apartment you want to buy, such as debts to the condominium. If you have any doubts about this declaration, you should consult Law no. 8/2022, which amended the horizontal property regime.






Source: Doutor Finanças