How to BUY your First Home in 2025

Summary

This video guides viewers through the essential steps of buying a home in Portugal, covering key aspects like choosing between fixed or variable mortgage rates, understanding necessary insurance policies, and negotiating a purchase offer. It delves into the paperwork involved, such as the Contract of Promise to Purchase and Sale (CPCV), the bank's property valuation, and securing final approval for a mortgage. Additionally, it highlights the financial benefits for young buyers, including reduced taxes and public guarantees. The video offers practical advice for navigating the bureaucratic process and making informed decisions during the home-buying journey.

Takeaways

• 😀 Understanding the difference between fixed and variable interest rates is essential when choosing a mortgage. The choice depends on market conditions and personal financial goals.
• 😀 Banks require two types of insurance when applying for a loan: life insurance to cover debt in case of death, and home insurance (multi-risk) to protect the property in case of damage.
• 😀 Insurance can sometimes be cheaper outside the bank, so it’s important to compare offers before deciding where to purchase your insurance.
• 😀 When making an offer on a house, be mindful of potential negotiations. It's common for sellers to say other offers exist, but keep your emotions in check and don't overbid.
• 😀 Key elements to include in your purchase proposal email: the offer amount, the time frame for closing, whether a pre-sale agreement (CPCV) is in place, the payment method, and any specific clauses.
• 😀 A Contract of Promissory Sale (CPCV) helps ensure the sale goes through. It specifies the agreed sale price, deposit, and timeline. Signing this contract often requires a deposit of 10-20%.
• 😀 If either party withdraws after signing the CPCV, the deposit may be forfeited, but if the seller cancels, they must return double the deposit.
• 😀 A property valuation is required by the bank before finalizing the loan. The bank will lend you the lower of 90% of the purchase price or 85% of the appraised value.
• 😀 If you sign the CPCV before the property valuation is complete, ensure the contract includes a clause that allows cancellation if the bank doesn't approve the full loan amount.
• 😀 Young buyers (18-35 years old) can benefit from public guarantees covering up to 10% of the down payment, allowing for 100% financing on properties up to €450,000.
• 😀 Additional benefits for young buyers include exemptions or reductions in property taxes like IMT (up to €316,000) and stamp duty, but these benefits may increase housing market pressure.

Q & A

What factors should you consider when choosing between a fixed or variable mortgage rate?

The decision between a fixed or variable mortgage rate depends on market conditions and personal preferences. A fixed rate offers stability, while a variable rate may be advantageous if interest rates are expected to decrease in the future. It's essential to evaluate the current Euribor rates and market trends before making a decision.

What types of insurance does the bank typically require when taking out a mortgage?

When taking out a mortgage, the bank typically requires two types of insurance: a life insurance policy, which ensures that the bank gets paid in case of the borrower's premature death, and a multi-risk insurance policy, which protects the house (the collateral) from damage such as fire or theft.

Can the insurance policies for a mortgage be bought outside the bank?

Yes, the insurance policies required by the bank can often be purchased from other providers, and sometimes this can be more affordable. It's important to compare the bank's offer with other providers to find the best deal.

What should you include in your proposal email when making an offer to buy a house?

Your proposal email should include the following details: the offered price, the proposed timeline for the deed, the presence of a promise to buy and sell contract (CPCV), any deposit payment details, specific clauses relevant to the agreement, and the proposed method of payment.

Why is it important not to be influenced by emotional pressures during a home purchase?

It's important to avoid being influenced by emotional pressures, such as the fear of losing the house or the desire to outbid others, because these can lead to overpaying. Stay firm on your pre-determined budget and requirements to make a rational financial decision.

What is the purpose of the Contract of Promise to Buy and Sell (CPCV)?

The CPCV is a legally binding contract where the buyer commits to purchasing the property and the seller agrees to sell it. It outlines key details such as the sale price, the deposit amount, and the timeline for the deed. It is used to secure the transaction before the formal deed of sale.

What happens if the buyer backs out after signing the CPCV and paying the deposit?

If the buyer decides to back out after signing the CPCV, the seller is entitled to keep the deposit. However, if the seller backs out of the deal, the buyer is entitled to receive the deposit back, along with an additional amount equal to the deposit as compensation.

What role does the bank's property valuation play in the mortgage process?

The bank's property valuation, carried out by an independent evaluator, is crucial because it determines the maximum amount the bank is willing to lend. The bank will typically lend 85% to 90% of either the property's purchase price or its appraised value, whichever is lower. This helps the bank minimize the risk of lending more than the property is worth.

What should you do if the bank offers less loan amount than what you need to purchase the home?

If the bank offers less than the required loan amount, it could lead to the cancellation of the CPCV or the buyer losing the deposit unless there is a clause in the agreement that allows for resolution in such cases. It’s advisable to either get the property valuation done before signing the CPCV or include a clause in the agreement that nullifies it if the bank's loan amount is insufficient.

What benefits are available for young buyers in Portugal when purchasing their first home?

Young buyers aged between 18 and 35 years in Portugal may benefit from public guarantees that allow them to borrow 100% of the home’s purchase price (if the home costs up to €450,000), eliminating the need for an upfront deposit. Additionally, they may be exempt from paying IMT (Property Transfer Tax) and reduced stamp duty on properties within certain price thresholds.