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HomeFINANCEBuying a house to rent with a home loan

Buying a house to rent with a home loan

Buying a house to rent is a popular investment in Portugal. According to the 2021 Census, there are more than 920,000 lease agreements in the country. But anyone who buys a house with the aim of investing and needs housing credit, should take some points into consideration.

To clarify and accompany you throughout the process, you can count on the specialist support from Doctor Financecredit intermediary, registered with the Bank of Portugal:

1. Credit access conditions

When proceeding with an application for a home loan for a second home, be aware that the bank will present a proposal different from the one it would present for a permanent home, especially if you already have a home loan running for this purpose. So count on variations:

  • At the spread: with two charges of this nature, the probability (in the eyes of banks) of failing to pay an installment increases. This is called the risk of bank default. To protect themselves, banks make the overall cost of credit – mirrored in the spread – larger;
  • At the amount to be financed: must be less than the amount financed for the first home, either as a total amount or as a percentage based on the valuation of the property.

2. Taxes payable

Don’t forget to calculate the taxes related to the purchase:

  • Municipal Property Tax (IMI);
  • Stamp Duty (IS);
  • Municipal Tax on Onerous Real Estate Transactions (IMT).

Also add to the equation the value of the deed, which varies depending on the value of the property.

3. Return calculation

To ensure that the purchase of a house to rent, using a home loan, is a profitable investment, you must do some calculations in advance.

In addition to the initial financial availability for the down payment (count on at least 20% of the value of the property), taxes and other charges related to the purchase, consider the value of the monthly installment (with possible interest variations, if you choose variable rate). Also contemplate the value of the condominium and IMI, diluting for the 12 months of the year.

The net value of the rent must, in order for this investment to pay off, be greater than this installment (with the aforementioned extras). Consider that the tax paid by the tenant must be subtracted:

  • 28%: if the contract is less than 2 years old;
  • 26%: with a contract between 2 and 5 years;
  • 23%: for contracts between 5 and 10 years;
  • 14%: from 10 to 20 years:;
  • 10%: if the contract is valid for more than 20 years.

At the time of signing the contract, also count on stamp duty in the amount of 10% of the value of an income.

If, after subtracting the property charges from the net income, the balance is positive, your investment is generating a return.

Get the best mortgage loan conditions for your case

To get boost gains with a house to rent, with associated housing credit, try to get the best loan conditions for your case. At Doctor Finance, housing credit specialists have great negotiating skills with banks, streamlining the process and negotiating the best conditions for each case. Without any associated costs.

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