Buying a home is the most important financial transaction in a person’s life, and nobody prepares you for the moment in which you become the owner of a property. The most important thing is to ask a series of questions about the purchase, about the property, and about the economic situation of the family unit to know if the choice is correct.
And what are the aspects on which you should look for answers?
Prices and market
There are two factors that weigh on the choice of a home, especially if it is the first: one is the budget or available capital, and the other the place where you want to reside. These are constraints on which there is little room for maneuver, although it is interesting to consider the options of our budget in alternative locations. Once chosen the preferred environments and alternatives, it is important to study the available offer, prices and their evolution, in order to intelligently negotiate the final price of the property. Thanks to internet portals, it is possible to have this information almost in real time, and compare options.
Mortgages and taxes
With the reactivation of the real estate market that has become evident in recent months, financial institutions have begun a battle to win customers through very aggressive mortgage offers with low spreads. The key to choosing is in the final price of the house; the mortgage payments that you will have to face depending on the final value of the home, the settlement period, and the conditions, advantages and possible difficulties that may arise. Read the fine print and ask questions about the commitments you make when signing a mortgage with a financial institution.
Once the mortgage is granted, you must consider the taxes
Not only at the time of purchase, but during the time you own the property, and when, eventually, sell it. At the time the purchase is made, if it is a new work, you must assume the VAT (4% in protected housing, 10% in free housing), and the tax on documented legal acts (0.1% in protected housing, between 1 and 1.5% in free housing); while in the case of second-hand properties you must take charge of the property transfer tax (from 6 to 8% depending on the property and its location).
As the owner, you must pay the municipality the property tax (IBI) and other taxes for surcharges or complementary services, which depend on each location. Finally, if you decide to sell your house, you will have to pay a tax for the surplus value, that is, on the value earned by the property while it was your property (with a cap of 20 years).
“Buying a home means more expenses than mortgage payments. Making numbers is the key to maintaining the balance of your personal finances.”
Income per family unit: the golden rule of personal finance says that spending on housing should not exceed 30% of the total income of the family unit. It is important to make numbers since it is not just about paying a monthly fee for a mortgage, but also taxes, expenses associated with the community, possible works or reforms, or even unforeseen, that will affect your budget.
Equally, it is fundamental to make a financial plan that contemplates improvements in income, so that the payment of the mortgage is less and less burdensome. It is about getting a fair balance between the time it will take you to pay off your mortgage, the income per family unit and the economic effort involved, which must be less over the years.
Technical aspects of new construction, rehabilitation, and associated costs
The purchase of a new building also involves expenses for furnishing, personalizing and improving the spaces; and if it is second hand, to rehabilitate and update the facilities. In both cases, it is essential to measure the expenses associated with the works and furniture and to consider a budget for possible contingencies, especially in the case of second-hand housing.
Neighborhood, services, endowments, transportation
The choice of the location of the home responds, as indicated, to the available budget (capital saved and mortgage granted), plus the choice of the preferred location, or at least, the one that offers the best relation price-quality.
And, how is that quality measured? It depends on the needs and preferences of each buyer: therefore, you should ask the real estate agent or the owner of the home you want to buy for the services and equipment available, store hours and supermarkets, accessibility to parking, the type of environment and neighbors of the area, security, nearby transport …It’s about making sure that your first home is in an environment that fits with your lifestyle and preferences.
What other questions would you ask before buying a home? What other factors did you weigh in acquiring your first home? Tell us in the comments of the blog, or through our social networks.