12 13
DISPOSAL COSTS
Agency Fee - If an investor wishes to sell a property
after several years, contacting a local real
estate agency is highly recommended.
Normally charging 5% of the selling price
plus VAT, this cost is normally borne by
the seller. It should also be understood
that the agency fees are part of the
ownership transfer costs and can be
deducted from the taxable capital gains
amount.
When choosing the type of interest rate for your mortgage you can
choose between a variable rate or a fixed rate option. The interest rates of a Portuguese variable rate mortgage are linked to either the
3, 6 or 12-month Euribor rate and increased by the margin (spread) that the bank applies. The Euribor rate is set by a panel of European
banks on a daily basis and is generally an indicator as to what rate
European banks will lend to each other at.
In the case of the 3-month Euribor rate, your mortgage repayments will be fixed for three months at the prevailing rate on the day you sign the mortgage deed. Thereafter,
the bank will apply the average rate of the 3-month Euribor rate to your mortgage from
the previous month every three months.
The interest rate margin (spread) will be confirmed on the day the mortgage is approved and will be fixed for the whole term of the loan.
A fixed rate mortgage product is also available from some lenders in Portugal. This mortgage type allows the client to budget for future mortgage payments as the
monthly cost will remain constant throughout the fixed rate period, and investors are protected from future increases of the European base rate. The fixed rate period can range from 1 to 30 years, and the rate is usually fixed on the day of the mortgage deed signing. Bear in mind that the buyer will also need to register the mortgage deed at the
National Land Registry Records along with the final deed.
It should be noted that for those clients purchasing the property using mortgage
financing, Portuguese lenders will require buyers to physically visit the bank at least once to avoid identity fraud.
ARRANGE MORTGAGE FINANCE LETTINGS AND MANAGEMENT
Once a lettings and management agent has been chosen, they will collect the keys
and handover documents and then inspect the property to ensure that everything
is in working order. This is known as snagging and is generally only conducted on
completed, new-build properties.
The agent is then responsible for marketing the unit to prospective tenants, conducting
viewings and handling negotiations.
Once an offer is approved, the agent will conduct the necessary background checks on
the tenant, including credit referencing, previous landlord, and employment checks.
If all information is acceptable to the landlord, the tenancy agreement is then sent to
both the landlord and tenant to sign. Once the contract has been signed, the agent will
organise check-in and collect the security deposit from the tenant. At this point, the
investor is obliged to have the rental contract registered with the tax office and pay the stamp duty on the first month s rent. The agent will be able to handle this on the investor s behalf.
The agent will collect the rent every month and pass it onto the investor. Some agents
collect their service fees on a monthly basis and deduct it directly from the rent.
The agent can also pay other bills such as condominium charges, utilities and telecoms
on behalf of the investor. When a tenancy agreement is terminated or not renewed,
the agent can begin to remarket the unit for either re-letting or sale. When the tenant
leaves, the agent will organise a property inspection and arrange for any necessary
repairs to be carried out. The agent will also advise whether there needs to be any
deductions from the tenant s deposit for loss or damages.
PROPERTY CHECK
MARKETING OF UNIT
ORGANISE CHECK-IN
RENT COLLECTION
CONTRACT RENEWAL OR REMARKETING
Capital Gains Tax - Apart from the agency fees, the seller will
have to pay the capital gains tax if the
property is sold at a higher price than the
original acquisition cost. Tax residents and
non-residents are subject to different tax
rates which have been covered in earlier
sections.
