What if, instead of buying a property, you built your own home, made to measure and thought out down to the smallest detail? In a place chosen by you, using construction credit, this dream can become reality!
As with all decisions that involve a large, long-term financial commitment, the best thing to do is to find out before taking the first step. Read this article until the end and find out the essentials about construction credit.
What is self-construction credit?
Basically, it is a housing loan that, instead of being intended for purchase of a dwelling, its purpose is to build a dwelling, and the acquisition of the respective land can also be partially financed.
As it has a different purpose, housing credit for self-construction also has different conditions.
What are the differences between housing loans for acquisition and housing loans for construction?
Whether for one purpose or another, the guarantee will be the mortgage of the property itself, that is, of the house already completed when the purpose of the financing is acquisition, or of the land, possibly already with improvements, in the case of self-construction.
While in a housing loan for acquisition the capital is made available in full at the time of writing, when it comes to self-construction the contracted capital will be made available in tranches, according to the progress of the work and after carrying out inspections requested by the borrower, the which are normally between 3 and 6. The last inspection will correspond to the completion of the work and will have the final availability of the capital not yet used and is also conditioned on the presentation of the use license issued by the respective Municipal Council.
The maximum amount of financing for the acquisition of permanent housing is 90% of the appraised or acquisition value, whichever is the lower of the two values. In the case of self-construction of permanent housing, the maximum amount of financing is also 90% of the appraised value of the property, after completion, and can be up to 100% of the total construction cost.
The maximum period will be the same in either case, acquisition or self-construction, however, when it comes to self-construction, borrowers have an initial capital grace period, normally up to 24 months, in which they only pay monthly or quarterly interest installments, which affect the capital used at each moment.
In the case of acquisition, for example, for a period of 30 years, the repayment period will also be 30 years. In the case of self-construction, for the same total period of 30 years, we will only have 28 years to repay the loan, as 2 years will be used for the contracted capital.
This period depends on the age of the oldest borrower and may be up to 40 years if the oldest is under 30, 37 years for the oldest between 30 and 35 years and 35 years for the youngest borrowers. older than 35 years. In any case, the age limit at the end of the contract is 75 years old, except in some situations in which, for borrowers over 50 years old, a period is allowed until the oldest reaches 80 years old, a maximum of 30 years .
What are the conditions for accessing housing credit for self-construction?
The approval process for this type of credit is similar to that for acquisition, only requiring additional presentation of the following documentation:
– Own land with construction feasibility
– Approved construction project
– Detailed budget with construction cost
– Construction license
The remaining documentation is the same as that required for an acquisition process:
– Identification documents of borrowers
– IRS Declaration and Settlement Note (latest available)
– Last 3 salary slips/6 months of green slips, in the case of self-employed workers
– Declarations of effectiveness, issued by employers
– Certificate from the Land Registry Office
– Building Booklet
– Use License
– Housing Technical Sheet (for use licenses after April/2004)
– Energetic certificate
– Credit Responsibilities Center of Banco de Portugal
What to take into account before deciding to build your house?
The first step is to have land viable for construction. If you have to buy land and take out a loan, the home loan for self-construction allows you to add the financing for the purchase of the land to the value of the loan for building the house.
Another important point is to have a construction project approved by the city council. This is one of the requirements to be approved for a credit for self-construction. Also consider that the project has associated costs, so it is worth calculating the expenses for licenses and project execution.
In addition to the initial costs of the banking process, a self-construction process has the additional cost of inspections, which normally have a unit cost of around 50% of the cost of the evaluation commission.
What you should also consider in this build house is the factor < strong>time.
As with housing loans for acquisition, the bank will require you to take out life and multi-risk insurance. Remember that it is not mandatory to do this with the bank where you are going to take out the credit, and you can choose another institution that offers more favorable conditions.
We know that building a house can be a very complex and bureaucratic process. Throughout the entire process, you can count on the support of our specialized teams.
If you decide to move forward with building your dream home, we can help you find the ideal land! Visit our website and discover the varied range of land we have available for you!
Decisions and Solutions – Credit Intermediaries, Lda., registered with the Bank of Portugal, as a Linked Credit Intermediary, under no. 926, verifiable at https://www. bportugal.pt/intermediariocreditofar/decisoes-e-solucoes-intermediarios-de-credito-lda is a mediator registered with the ASF, since 29 September 2009, with the category of Insurance Agent, under no. 409311648/3, with authorization to Life and Non-Life Branches, available at www.asf.com.pt. The insurance intermediary does not assume risk coverage. Decisions and Solutions – Mediação Imobiliária, Lda., holder of AMI License No. 9300 issued by IMPIC, I.P.
