fbpx

Updated: May 25, 2023

So, you’re looking to buy property in Portugal, or are you at least exploring this as a viable option? The real estate market in the country, particularly in the capital city of Lisbon, has been moving from strength to strength in recent years. Buying your dream home or finding a perfect investment property to rent out can be exciting, and you may wonder about financing it. So, in this article, we’ll look at how to get a mortgage in Portugal as a foreigner. 

You might find the idea of financing this property daunting, but you’ll be pleased to know that it is a fairly straightforward process to take out a mortgage in Portugal. Even better, you’re not likely to face many unmanageable difficulties during the process, and there are no restrictions in purchasing property here as an international buyer. 

Portugal is an excellent country to invest in, do business in, or live in. People looking to buy real estate in Portugal will find that the market has lots to offer. 

This article covers how to get a mortgage in Portugal and what to look out for when applying for a mortgage. We aim to arm you with everything you need to be aware of when financing your property in Portugal.

how-to-get-a-mortgage-in-portugal

We’ll delve into the following:

  • Should you buy property in Portugal?
  • Taking out a mortgage for the Portugal Golden Visa
  • Benefits of getting a mortgage in Portugal
  • Useful terminology and acronyms
  • What types of mortgages are available in Portugal?
  • How do mortgages in Portugal work?
  • Practical information on mortgages in Portugal
  • FAQs
  • Plus much more

 

Should you buy property in Portugal?

So, first things first, should you purchase property in Portugal? Before wondering which mortgage is right for you or how to get a mortgage in Portugal, first consider whether real estate investments here are the right option for you. What does the real estate market offer? Is commercial or residential real estate more suitable? And is Portugal the right place for you?

Portugal is blessed with a high quality of life, a low cost of living, and sublime weather. With an excellent healthcare and education system, friendly locals, the favorable Non-Habitual Resident (NHR) tax regime, and vibrant culture, Portugal has lots to offer. Whether you are moving with a family, retiring, looking for an opportunity to generate rental income, or simply looking for a lovely Mediterranean corner of the world to call home, then yes, Portugal is likely a great option to consider.

To learn more about Portuguese tax residency, check out our article: NHR Portugal Program – All You Need to Know.

If you are interested in buying real estate in Portugal, you’ll be able to benefit from low mortgage rates and also the Portugal Golden Visa Program.

You can read more in our article: Portugal Golden Visa: Your Ultimate Guide.

 

Portugal Golden Visa Program: Taking out a mortgage for the Golden Visa

Portugal-Golden-Visa-ending

The Portuguese Golden Visa Program is a popular way for foreign investors to obtain residency in Portugal. You can invest in a property and obtain a Portuguese residency permit, and after five years, become eligible for Portuguese citizenship.

Real estate investments that qualify for Portugal’s Golden Visa Program are as follows:

  • Residential real estate: Make a qualifying investment in residential real estate in a designated interior area of Portugal worth €500,000 (or €350,000 if investing in a rehabilitation project). If the residential property is located in a designated ‘low-density’ area, a 20 percent discount will apply to the minimum investment amount. 
  • Commercial real estate: Make a qualifying investment in commercial real estate anywhere in Portugal that is worth at least €500,000 (or €350,000 if investing in a rehabilitation project). If the commercial property is located in a designated ‘low-density’ area, a 20 percent discount will apply to the minimum investment amount. 
  • Real estate on Madeira or the Azores: Make a qualifying investment in residential or commercial real estate on the autonomous islands of Madeira or the Azores that is worth at least €50,000 (or €350,000 if investing in a rehabilitation project).

However, Golden Visa applicants may wonder whether it is possible to get a mortgage to buy a property and still qualify for a Golden Visa. While you will not be able to get a mortgage on the minimum investment amount as per the Golden Visa requirements (i.e., €350,000, €500,000, or the discounted amount if the is in a designated ‘low-density’ area), you will be able to get a mortgage on anything above this initial qualifying amount.

So, if your Golden Visa property value is €700,000 and you are required to invest €500,000 – assuming it is not located in a ‘low-density’ area – you can get a mortgage on the remaining investment cost of €200,000.

It is important to note that the Portuguese Government announced the end of the Golden Visa Program. As such, if you are interested in using the Portugal Golden Visa as a route to Portuguese citizenship, it is essential to begin your application as soon as possible before the program officially ends.

You can read more in our article: Understanding the Portugal Golden Visa Changes.

 

Property prices

variable-rate-mortgage-property-tax-portugalProperty prices in Portugal have recovered significantly over the last few years and, despite a slight dip during the COVID-19 pandemic, are on the rise once again. From 2021 to 2022, for example, property prices increased from €3,924 to €4,250 per square meter in Lisbon Metropolitan and from €2,808 to €3,186 in Porto Metropolitan. In 2023, the average price per square meter of property in Portugal is around €2,950. Prices will vary, however, depending on the type of property you are looking to purchase – luxury properties tend to be more expensive – and their location.

At present, Portugal’s highly skilled workforce, booming tourism industry, 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.

 

Benefits of Getting a Mortgage in Portugal

Portugal prides itself on the way it welcomes visitors and investors, and you’ll be able to easily find many options to secure housing loans from various local banks with the help of an experienced mortgage broker. All the conditions for getting a mortgage loan are in place to achieve your dream of owning a property in Portugal. 

A mortgage is the most common way to finance your property purchase in Portugal. Some of the benefits of taking out a mortgage in Portugal are:

  • There is increased interest from Portuguese lenders in assisting foreigners with lending solutions.
  • The Portuguese lender will carry out legal checks. 
  • The lender will arrange for a valuation to take place.
  • There are low mortgage rates in Portugal.
  • Both residents and non-residents can apply for a mortgage from banks in Portugal.
  • In Portugal, properties purchased on credit can be rented out without restrictions, therefore reducing risks.

property-and-mortgage-deeds

Before you look into a mortgage, it’s important to ensure that the property you are purchasing has gone through the proper checks. To do this, you may want to consider employing the service of a real estate lawyer. You will require legal aid at various points throughout the process of purchasing a home in Portugal, so it can be helpful having a reliable lawyer on your team from the start, particularly as they will be able to navigate the Portuguese language barrier if you are not familiar with the language. 

The services a real estate lawyer can provide include, but are not limited to:

  • Overseeing the purchasing transaction from start to finish
  • Remote handling of bureaucratic procedures
  • Checking whether any outstanding debts are attached to the property
  • Checking who the legal owner(s) is/are and that they have the right to sell the property
  • Checking the construction history of the property (property valuation)
  • Drawing up contracts, such as the reservation agreement
  • Review the purchase and sale agreement and advise you on its legal consequences and obligations
  • Requesting necessary legal documents for the property
  • Providing Portuguese real estate legal advice

To learn more, visit our article: Portugal Real Estate Lawyer: A Helpful Overview.

Once you are confident that your chosen property is right for you, you can move on to finding a mortgage. There are different mortgage loans to choose from in Portugal, such as a fixed-rate mortgage or variable-rate mortgage. So, let’s have a more detailed look at what you need to know about mortgages in Portugal.

Useful Terminology and Acronyms

Cost of living in Portugal - Mortgages Here are some useful terms and acronyms so that you are well-versed in understanding the basics of mortgages in Portugal.

TAN – Taxa Anual Nominal, the TAN is commonly known in English as the Annual Percentage Rate (APR). The variable TAN is the sum of the spread and the indexing rate, which is usually Euribor for 12 months.

Euribor – The Euro Interbank Offered Rate is a daily reference rate based on the average interest rates at which Eurozone banks offer to lend to other banks in the euro wholesale money market (also known as the interbank market). You can see the 12-month Euribor Rate online.

TAEG – Taxa Annual de Encargos Efetiva Global is the sum of TAN and other costs from the lender, such as origination fees, required insurance, and so on. This rate is used to compare similar mortgage loan options from different banks effectively.

 

What types of mortgages are available in Portugal?

Fixed-rate mortgage

Fixed-rate mortgages allow property owners to pay a constant rate for a certain period of time. These mortgages are offered for anywhere between 3 and 30 years, with banks charging a significant premium for a fixed-rate mortgage. The advantage is that borrowers are generally protected against fluctuations in Euribor rates.

For example, as of May 2023, fixed-rate mortgages are available at 3.9 percent (TAEG) for up to five years, based on loan-to-value (LTV) ratios of up to 70 percent. It is important to note that while LTV ratios can go up to 90 percent, non-fiscal residents are limited by regulation of up to 75 percent.

Variable-rate mortgage

Variable-rate mortgages depend on the mortgage spread – a fixed percentage of interest – offered by the bank you borrow from. Currently, the mortgage spread is sitting around 0.85 percent for the majority of financial institutions. 

Mortgages in Portugal typically reach up to 70 percent for non-residents, so customers should budget to have around 30 percent of the purchase price within easy reach, plus the cost of taxes and fees on top of this. The monthly payments on a variable-rate mortgage fluctuate over time depending on the indexer (Euribor), which can be defined as three, six, and 12 months as of May 2023. 

Over the repayment period, the monthly payments on variable-rate mortgages are usually revised. Also, you will be charged 0.5 percent on the repaid capital if you decide on early repayment.

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 while banks do offer mortgages to retirees, most banks will not offer a mortgage to individuals who are over 70 years old. Some, however, will extend this limit to 80.

Mortgages in Portugal for businesses

Suppose the property you intend to buy is for commercial use. In that case, the maximum mortgage is usually 50 percent of the purchase price (or, if lower, the valuation is stated in the valuation report).

How much do I need to deposit?

  • Non-residents should know that the minimum deposit is usually about 30 percent of the purchase price.
  • Financing institutions provide between 60 and 70 percent of the valuation price for non-residents.

 

How do mortgages in Portugal work?

Portugal-lake

The application process begins with an initial approach to the bank or mortgage broker. Having an experienced mortgage broker on your side will make the process much simpler to get the best deal for your situation. A no-obligation estimate or initial assessment follows.

A six-step process is then laid out:

  1. Mortgage quote
  2. Application forms delivery
  3. Mortgage offer
  4. Valuation report
  5. Completion arrangements
  6. Payment (all the associated mortgage-related fees, tax office fees, and taxes) and signing (property deeds and mortgage deeds)

Mortgage-related fees can include:

  • Property and mortgage deed registration
  • Mortgage arrangement and administration
  • Non-refundable commitment fee
  • Survey and appraisal
  • Legal fees

Work out the mortgage rates

The cost of the mortgage loan depends on the applicant’s financial status. The mortgage lender will measure your ability to maintain the loan. The spread or interest loans that the bank charges are 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 three to five percent.

Mortgage agents will often approach various banks in Portugal. The goal is to secure the most competitive rates for you. Portuguese banks offer foreigners mortgages with a Loan-to-Value ratio (LTV) of 60 to 70 percent.

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:

  • find-information-to-buy-a-house-in-portugal 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 mortgage lenders may have more competitive interest rates but a cap on how much you can borrow.
  • Some banks may offer variable-rate mortgages only, not fixed-rate products.
  • Different banks will have different requirements when analyzing how much you can pay for a given loan amount.
  • Some banks will emphasize certain types of income streams more than others.
  • Some banks may not consider renting.
  • Some banks 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 suggestions that may work for you.

Documents you must provide to get a Portuguese mortgage

If you are going to apply for a mortgage in Portugal, you have to submit the following documents:

  • Copy of passport
  • Portuguese tax number (also called a NIF number)
  • Proof of income
  • Bank account statements
  • A recent utility bill
  • Recent mortgage statements
  • Proof of any savings or investment income accounts
  • Bank reference letters
  • Property details – buying commitment or sales contract

These documents vary depending on your employment status. You should include the length of time that you have been in the company/employed/self-employed and demonstrate your gross annual salary.

If employed:

  • The previous year’s tax returns
  • Salary income, as shown through the past three months’ payslips
  • Reference letter from employer

If self-employed (hold a 20 percent or more share in a limited company):

  • Last year’s income tax return
  • Last three months of business bank statements
  • Three years of company profit & loss and balance sheet

Other income:

  • Confirmation of pension income for the last three months
  • Copy of tenancy agreement for rental properties
  • The last three months of bank 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 purchase 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.

The following articles may also be of interest to you:

Our e-book, Your Expert Guide to Buying Property in Portugal, provides you with everything you need to know about buying property, including an in-depth chapter on financing your property and an overview of the best locations to consider.

GET IN TOUCH

Practical Information to Know about Mortgages in Portugal

This section will cover the costs associated with mortgages in Portugal, the application process, and the lending criteria for a mortgage in Portugal.

Cost and fees for mortgages in Portugal

The costs and fees for Portugal mortgages are as follows: 

How to apply for a mortgage

The application process for a mortgage in Portugal begins by approaching the bank or mortgage agent. They will proceed to supply you with a no-obligation estimate or preliminary analysis. 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 percent to 80 percent of the property’s purchase price.

What are 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 to 35 percent 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.

 

Portugal Mortgage Calculator

Many banks and Portuguese mortgage providers have their own mortgage calculator on their websites where you can calculate an estimated monthly mortgage repayment. Most will take into account your net borrowing, mortgage insurance, and property tax.

how-to-get a-mortgage in-portugal

Frequently Asked Questions about How to Get a Mortgage in Portugal

How to get a mortgage in Portugal?

Portuguese banks offer mortgages to residents and non-residents. If you can’t have an agent, you can approach a major Portuguese financial institution – such as Santander, Novo Banco, BBVA, EuroBic, or Bankinter – directly. Note that the local branches are 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 real estate investment 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, or property purchase tax, should be paid separately from the mortgage payments.

Can foreigners get mortgages in Portugal?

Since 2017 it has been possible to take out up to around 70 percent of the sale price as a loan as a foreigner. Portugal mortgages are usually given to people aged 65 and under, although certain banks extend this to 80 years. The mortgage process is simple and even encouraged by Portuguese institutions. It is even possible to get a mortgage for the Portugal Golden Visa on the cost of the real estate investment that exceeds the minimum investment amount.

Can you get a mortgage in Portugal as a foreigner?

Yes, the Portuguese Government allows foreigners to take out a mortgage in Portugal. Many Portuguese banks offer mortgages in Portugal for non-residents, and it is best to speak with a Portuguese bank, mortgage broker, or real estate expert who can guide you in the right direction. Golden Visa applicants can even talk to them about taking out a mortgage for the Portugal Golden Visa.

You will be able to take out mortgage loans that are around 70 percent of the sales price. The process is generally very simple, and foreigners are encouraged to purchase property here. However, it is worth having an experienced mortgage broker who speaks the Portuguese language on your side to ensure that you get the best price and mortgage type depending on your needs.

Is it better to get a Portuguese mortgage?

Getting a Portuguese mortgage is very common, and you will be able to secure a mortgage regardless of whether you are a resident or are looking for mortgages in Portugal for non-residents.

What do I need for a mortgage in Portugal?

To apply for a mortgage in Portugal, you will need to have the following documents to hand: 

  • Copy of passport
  • Portuguese tax resident number (NIF number)
  • Proof of income
  • Bank statements
  • Recent utility bills
  • Recent mortgage statements
  • Proof of any savings or investment accounts
  • Bank account reference letters
  • Property details – buying commitment or sales contract

You will also be required to show additional documents, which will depend on your employment status. If you are a retiree, you must be able to prove a regular pension income.

Please note that the bank may request more documents.

What is the average mortgage rate in Portugal?

Portugal mortgage rates in 2023 depend on many different factors. These include the size of the down payment or loan-to-value ratio (LTV), the location of the property, whether you are in full-time employment or are self-employed, and the bank’s assessment of your risk as a borrower. 

A variable rate mortgage will depend on the spread offered by the bank and will range between 0.9 percent and 1.5 percent in most institutions. This rate currently sits around 0.85 percent for most institutions. The monthly payment will fluctuate over time and will depend on Euribor rates.

For fixed-rate mortgages, borrowers can pay a fixed rate for a certain period and will usually be guarded against fluctuations in the Euribor. Banks in Portugal will offer fixed rates from anywhere between three to 30 years and will charge a significant premium for this. To provide you with an example, there are fixed-rate mortgage options that are available at 3.9 percent (TAEG) for up to five years based on a loan-to-value ratio (LTV) of up to 70 percent.

Related Articles
Portimão Portugal Real Estate
Read More Arrow
Houses for Rent in Terceira: The Lilac Isle
Read More Arrow
Apartments for Rent in Faro Portugal – Algarve Coast
Read More Arrow
More Info