How to Get a Mortgage in Portugal in 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.

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.

Note that the Portugal Golden Visa may be ending soon. If you would like to apply for the program, you should begin the process now. You can stay up to date with the latest developments in our article on the topic: Portugal is Ending Its Golden Visa Program.

 

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

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.

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

 

Property prices

Property 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.

In Lisbon Metropolitan, property prices stood at €4,250 per square meter and €3,186 in Porto Metropolitan. House 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. The housing market has moved from strength to strength in recent years and is an attractive market for both foreign investors and homebuyers. Compared with other Western European countries, you should also find prices to generally be quite reasonable. Note that popular areas, such as Lisbon and the Algarve, will be more expensive than other parts of the country. If you are looking to buy and then generate rental income, then this can also be a lucrative investment.

Also, it’s worth being aware that the purchase price can be higher or lower than the asking price. This difference between the purchase price and sales price is because sellers often look to sell their properties by a set date and are often constrained by other variables. It is also worth considering that, as these are averages, the prices can also be more expensive than this.

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 mortgage 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.
• Mortgages in Portugal for residents and non-residents are available in Portugal.
• In Portugal, properties purchased on credit can be rented out without restrictions, therefore reducing risks.

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

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 for non-residents typically reach up to 70 percent, 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?

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, from getting a quote to signing the property deeds and mortgage deeds:

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. Most banks in Portugal 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:

• 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 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 income 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.

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: 

• €290 application fixed fee
• €280 fixed valuation fee
• Stamp Duty Tax (IMI) 0.8 percent of the property price
• €1,200 notary, registry, and tax office fees for mortgage deeds
• Property tax/property purchase tax (IMT) ranges between 2 percent and 8 percent

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.