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So, you’re looking to buy property in Portugal, or are 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. However, while this is a time of great excitement, buying your dream home or perfect investment property to rent out and gain rental income from, one of the key obstacles that you’ll face is financing the property. You’ll be pleased to know that it is fairly straightforward to take out a mortgage in Portugal and you’ll typically have no restrictions in purchasing property here as an international buyer. 

Portugal is an excellent country to invest in, do business, or 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. We aim to arm you with everything you need to be aware of when financing your property in Portugal.

We’ll delve into the following:

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

 

Should you buy property in Portugal?

So, first things first, should you buy property in Portugal? Before wondering about which mortgage is the right one for you, or how to get a mortgage in Portugal, consider whether you should buy property here. What does the real estate market offer? 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 Residence (NHR) tax scheme, and a vibrant culture, Portugal has lots to offer. Whether you are moving with a family, retiring, or simply looking for a lovely Mediterranean corner of the world to call home, then yes, Portugal is likely a great option to consider. 

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

Property prices in Portugal have recovered significantly over the last few years and, despite a slight dip during the COVID-19 pandemic, seem to be on the rise once again. Since 2017, real estate prices have outstripped the prices that were seen before the 2008 financial crisis and the property market has become one of the most sought after in Europe. 

At present, Portugal’s highly skilled talent, 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 banks, with the help of an experienced mortgage broker. All the conditions for getting a mortgage 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 benefits of getting a mortgage in Portugal are:

  • There is increased interest from Portuguese lenders in assisting foreigners with lending solutions
  • The Portuguese mortgage 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 Portuguese banks
  • In Portugal, properties purchased on credit can be rented out without restrictions, therefore reducing risks
  • Mortgage installment rates in Portugal are at historic lows

Useful terminology and acronyms

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 averaged interest rates at which EU 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 effectively compare similar mortgage loan options from different banks. 

 

What types of mortgages are available in Portugal?

Fixed-rate mortgage

This allows customers to opt for a 1-15 year fixed rate product that then reverts to variable installment repayments.

Variable-rate mortgage

Mortgages in Portugal typically reach up to 70% for non-residents, so customers should budget to have around 30% of the purchase price within easy reach, plus the cost of taxes and fees on top of this. The monthly payment fluctuates depending on the indexer (Euribor). Over the repayment period, the monthly mortgage payments are usually revised. Also, you will be charged 0.5% 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 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

If the property you intend to buy is for commercial use then the maximum mortgage is usually 50% of the purchase price (or valuation if lower).

How much do I need to deposit?

  • Residents should know that the minimum deposit is usually between 20-30% 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. 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 preliminary analysis follows.

A six-step process is then developed:

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

Work out the mortgage rates

The cost of the mortgage 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 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 ratio (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 mortgage 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 suggestions 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
  • 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:

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

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

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

Other income:

  • Confirmation of pension income for the last 3 months
  • Copy of tenancy agreement for rental properties
  • The 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.

The following articles may also be of interest to you:

Our new 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.

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Practical information to know about mortgages in Portugal

Cost and fees for mortgages in Portugal

The costs and fees for Portugal mortgages are: 

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 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 30-35% 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.

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. 

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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 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, or property 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, although certain banks extend this to 80 years. The mortgage process is simple and even encouraged by Portuguese institutions.

Can you get a mortgage in Portugal as a foreigner?

Yes, foreigners can take out a mortgage in Portugal. Many Portuguese banks offer mortgages and it is best to speak with Portugal mortgage brokers or real estate experts who can guide you in the right direction.

You will be able to take out mortgage loans that are around 70% of the sales price. The process is generally very simple and foreigners are encouraged to buy property here. However, it is worth having an experienced mortgage broker 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 number
  • Proof of income
  • Bank account 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.

Please note that the bank may request more documents.

What is the average mortgage rate in Portugal?

Portugal mortgage rates in 2022 depend on many different factors. These include the size of the down payment (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% and 1.5% in most institutions. The monthly payment will fluctuate over time and will depend on Euribor rates.

For fixed rate mortgages, borrowers can pay a constant 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 15 years and will charge a significant premium for this. To provide you with an example, there are fixed-ate options that are available at 3.6% (TAEG) for up to five years based on LTV ratios of up to 70%,.

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