With extremely high property prices in different countries of Europe, many people are starting to think about purchasing a home in Portugal of their own. While simple rental cost vs. mortgage cost comparisons can be very attractive, buying a home is a serious commitment, and there are many factors to consider:



How long you plan to live or maintain the overseas property.

Selling a home costs money and if you potentially may have to sell in the very short term, the value of your home may not have appreciated enough to cover the costs of buying and selling.

The length of time that it will take to cover those costs depends on various economic factors. Average appreciation in Portugal tends to sit at around 10 percent per year. In this case, you should plan to stay with your home at least 2-3 years to cover buying and selling costs.

How long the home will meet your needs

What features do you require in a home to satisfy your lifestyle now? Five years from now? People tend to remain with their homes longer than they initially intend, primarily due to the work and expense associated with moving. Therefore it is worth considering a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you will need will help you find a home that will satisfy you for years to come.

Your financial health - your credit and home affordability.

Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good?

Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. It is, however, important to stay within your comfort zone.

Purchasing a house involves many up-front and ongoing costs, and the stress of worrying about those costs often outweighs the satisfaction that may come from owning a slightly nicer home.

To determine how much home you can afford, talk to a bank or go online and use a home affordability calculator. Good calculators will give you a range of what you may qualify for. While some may say that the 28/36 rule applies, in today's home mortgage market, banks are making loans customized to a particular person's situation.

The 28/36 rule means that your monthly housing costs can not exceed 28 percent of your income and your total debt load can not exceed 36 percent of your total monthly income. Depending on your assets, credit history, job potential, and other factors, lenders can push the ratios up to 50-70 percent or higher. While we're not advocating you purchase a home utilizing the higher ratios, it is important for you to know your options.

Where the money for the transaction will come from.

Typically, homebuyers will need some money for a down payment and closing costs. However, with todays broad range of loan options, having a lot of money saved for a down payment is not always necessary - if you can prove that you are a good financial risk for a lender. If your credit isn't stellar but you have managed to save 25 percent for a total down payment, you will still appear to be a very good financial risk to a bank.

The ongoing costs of home ownership.

Maintenance, improvements, taxes, and insurance are all costs that are added to a monthly house payment. If you buy a condominium or townhouse, a monthly homeowners association or maintenance fee will be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your Real Estate Agent and your bank aware of your desire to limit these costs.

If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.

As a final note and in a general way we can say that the property investment in Portugal is always an excellent short, medium and long term investment.