Portugal is an excellent country to invest, do business, and live in. For people looking to buy real estate in Portugal, they can rest assured that getting a mortgage in Portugal is easy and straightforward.
This article covers how to get a mortgage in Portugal and what to look out for when applying for a mortgage.
Benefits of getting a mortgage in Portugal
Portugal prides itself on the way it welcomes visitors and investors. All the conditions for getting a mortgage are in place to achieve your dream of owning a property in Portugal. Our suggestion is to take advantage of them.
Some benefits of getting a mortgage in Portugal are:
A mortgage is the most common way to finance your property purchase in Portugal
There is increased interest from lenders in assisting foreigners with lending solutions
The lender will carry out legal checks
The lender will arrange for a valuation to take place
Mortgages in Portugal have low mortgage rates
Both residents and non-residents can apply for a mortgage from Portuguese banks
In Portugal, properties purchased on credit can be rented out without restrictions. This avoids risk.
Mortgage installment rates in Portugal are at historic lows
What types of mortgages are available in Portugal?
There are several available mortgage solutions in Portugal for foreign residents and non-residents. All mortgages have two parts: principal and interest. Your principal is the amount that you borrow from a lender. The interest is extra money that goes to your lender in exchange for giving you a loan. Banks offer both fixed and variable-rate mortgages.
This allows customers to opt for a 1-15 year fixed rate product that then reverts to variable installment repayments.
Mortgages in Portugal typically go up to 70% for non-residents, so customers should budget to have around 30% of the purchase price, plus the cost of taxes and fees. Monthly payment fluctuates depending on the indexer ( EURIBOR ). Over the repayment period, the monthly payments are usually revised. Also, if you decide on an early repayment you will be charged 0.5% on the repaid capital.
Mortgages in Portugal for retirees
As a retiree in Portugal, you can get a mortgage in Portugal provided you have a regular pension income. Note that most banks will not offer a mortgage to individuals who are over 70 years old. Some will extend this limit to 80.
Mortgages in Portugal for businesses
If the property you intend to buy is for commercial use the maximum mortgage is usually 50% of the price (or valuation if lower).
How much do I need to deposit?
Residents should deposit at least 30% of the sale price.
Financing institutions provide between 60% to 70% of the valuation price for non-residents.
How do mortgages in Portugal work?
The application process begins with an initial approach to the bank or mortgage broker. A no-obligation estimate or preliminary analyses follows.
A six-step process is then developed:
Application forms delivery
Payment (all the associated fees and taxes) and signing (property and mortgage deeds).
Work out the mortgage rates
The cost of the mortgage depends on the applicant’s financial status. The lender will measure your ability to maintain the loan. The spread or interest that the bank charges is a measure of the bank’s valuation of risk.
In Portugal, the interest rate charged is generally Euribor plus the spread. This adds to the spread charged by the banks, which is usually 3-5%.
Mortgage agents will often approach various Portuguese banks. The goal is to secure the most competitive rates for you. Portuguese banks offer foreigners mortgages, with a Loan to Value (LTV) of 60-70%.
How to pick the right Portuguese bank for your mortgage
Many people will focus on the pricing of a mortgage facility. Yet, there are other important factors to consider:
Some banks have a mandatory life insurance obligation that adds to the cost of a mortgage. It is usually best to avoid it for many non-residents
Some lenders may have more competitive interest rates but a cap on how much you can borrow
Some banks may not offer fixed rate products
There are many ways that a bank will analyze your affordability for a given loan amount
Some banks will emphasize certain types of income streams more than others
Some banks may not consider renting
Some will respond differently to income value
This illustrates that some profiles are better suited than others for certain banks when it comes to getting formal mortgage approval.
The important factor is to make sure that your information is carefully examined and that whenever possible, you are given several suggestion options that may work for you.
Documents you must provide to get a Portuguese mortgage
If you are going to apply for a Portuguese mortgage, you have to submit the following documents:
Copy of passport
Portuguese tax number
Proof of income
Recent utility bills
Recent mortgage statements
Proof of any savings or investment accounts
Bank reference letters
Property details – buying commitment or sales contract
These documents vary depending on your employment status.
Last year tax returns
Last three months’ payslips
Reference letter from employer
If self-employed (hold a 20% or more share in a limited company):
Last year’s tax return
Last three months of business bank statements
3 years of company profit & loss and balance sheet
Confirmation of pension income for the last 3 months
Copy of tenancy agreement for rental properties
Last 3 months of statements showing rent received
Copy of investment certificates
Please note that the bank may request more documents.
Get advice from a specialist
If you have found your dream property in Portugal, seek help from a specialized property investment firm such as Goldcrest.
Independent advice is essential if you want to buy property overseas. This is especially true for large investments. When looking to get a mortgage in Portugal try to partner with an agent who understands the country, the terms, and the market. Experienced professionals guarantee purchase advantages, and work through the requirements, hidden costs, and fine print smoothly and efficiently.
Contact the Goldcrest team to access exclusive information on the property market in Portugal and find out how much you can save on your international investment.
Practical information to know about mortgages in Portugal
Cost and fees for mortgages in Portugal
€290 Application fixed fee
€280 Bank valuation fixed fee
Stamp Duty Tax (IMI) 0.6% amount of mortgage
€1,200 notary, registry, and tax office fees for mortgage deeds
How to apply for a mortgage
The application process begins with an approach to the bank or mortgage agent. They will proceed to supply you with a no-obligation estimate or preliminary analyses. This is often done at the branch level. It is important to have a documentation copy ready for the banker or mortgage agent to analyze and give you feedback.
What is the maximum loan to value for Portuguese mortgages?
The maximum loan to value for Portuguese Mortgages for non-residents is between 70% to 80% of the purchase price of the property.
What is the lending criteria for a mortgage in Portugal?
Portuguese banks will consider in the application process the applicant’s ability to pay the mortgage to the full term. To establish the affordability of the loan, the bank will apply a simple outgoings-to-income calculation.
The monthly outgoings including the new mortgage payment will be subtracted from the applicant’s total monthly income. The total monthly outgoings should never exceed 30-35% of the net monthly income. This is a very simplified description of how the bank reaches its decision. Always consult the bank or your agent for a more accurate assessment.
Should I buy property in Portugal?
If your plans for buying a property include a mortgage in Portugal, there are several financing solutions available. These work well for foreign residents and non-residents.
Portugal’s highly skilled talent, world-class infrastructure, business-friendly environment, and easy access to markets are among several factors that contributed to a continuous and steady flow of investments into different economic sectors in these past few years.
Moreover, you can benefit from low mortgage rates as well as being eligible for Portugal’s Golden Visa Program.
Frequently asked questions about how to get a mortgage in Portugal
How to get a mortgage in Portugal?
Portuguese banks provide mortgages to residents and non-residents. If you can’t have an agent, you can approach one of the major Portuguese banks directly - Santander, Novo Banco, BBVA, EuroBic, or Bankinter. Note that the local branches are very independent and you may have to navigate through all the information until you find a good deal.
What are the benefits of getting a Portuguese mortgage?
The key benefit of taking out a Portuguese mortgage is that the lender will carry out legal checks on the property and arrange for a valuation to take place.
Can I add the IMT tax due to the total mortgage sum?
In Portugal, the IMT tax should be paid separately from the mortgage.
Can foreigners get mortgages in Portugal?
Since 2017 it has been possible to take out up to around 70% of the sale price as a loan as a foreigner. Mortgages in Portugal are usually given to people aged 65 and under. The process is simple and even encouraged by the Portuguese institutions.