The Hidden Costs of Selling and Buying a House
If you are looking at investing in a property in Portugal, you must be wondering what the hidden costs of selling and buying a house are? The article below should guide you in estimating those costs.
Buying a property abroad such as a dream house in the Algarve country side, a villa overlooking a golf course or a sea front apartment is a financial and personal commitment not all of us will make for various reasons.
For the ones ready to make the jump, however, the fact that you are looking to invest in a foreign country should not make you forget the same basic rules you would apply at home.
Unless you are very wealthy, you will need to finance the purchase with a mortgage, and this is the biggest cost associated with buying. However, there are other costs that you will have to pay, and you will need to take them into account when you are calculating what you can afford.
Equity is the difference between the purchase price and the mortgage you are taking out. The maximum you can borrow from your lender is usually 92% of the purchase price. Therefore buyers will require at least 8% of the purchase price in equity. This is often referred to as the deposit. If you are also selling, your equity will normally be included in the value of your existing home.
Mortgage lending has become very competitive, and there are a wide range of products available. Make sure you familiarise yourself with the different lenders and products because your decision will affect you for years to come. Understand the difference between fixed rate mortgages, variable rate mortgages and deferred start mortgages. Research the new innovative products on the market. Mortgages are a complex area, and you may need financial advice to help you decide on the most appropriate product for your circumstances.
Stamp duty is calculated as a percentage of the purchase price, and depends on the type of purchaser and the price range.
The legal process involved in buying or selling a property, called conveyancing, is complex. You will need a solicitor to prepare all the necessary paperwork to effect the legal transfer of the property. This will usually cost 1% of the purchase price, plus VAT.
You and your mortgage lender will require a valuation report. You may wish to have a more detailed report prepared, particularly if you are buying an older property. A basic valuation report will cost in the region of €150 and a detailed surveyor’s report will cost considerably more.
You and your lender will want to protect your new home against any damage. Before a mortgage is granted, insurance cover will have to be taken out. Your lender will also insist on life cover to ensure the mortgage will be repaid in the event of your death.
There are considerable costs associated with selling or buying a home. It is important that you take them into account when deciding what you can afford. A careful analysis of the costs beforehand could prevent unforeseen financial problems later in the buying process.
Disclaimer
The information provided on the site is indicative only and does not form part of any contract. Any advice should be seeked after qualified legal professionals. Currency equivalents are indicative only and should be checked with your bank. |
