How to get a Mortgage in Portugal
Foreigners who are looking to buy a property in Portugal often ask the same questions: on the one hand, is this even possible? On the other hand, is it easy? The answer to both questions is yes, and yes.
Over the last few years, Portugal has invested strongly to create simple and very attractive conditions to encourage foreign investment. Especially in terms of investing in real estate in Portugal.
This effort has been carried out not only by public entities, which have developed very interesting programmes and tax schemes specifically designed for foreigners, but also by real estate consultants and banks in Portugal, which today have a wide experience in supporting clients from all over the world.
The process of buying a home in Portugal has become increasingly simple, fast and attractive to buyers from all over the world.
However, there are still many doubts as to which is the best way to finance a property in Portugal.
If you are thinking of buying a property, and you want to apply for a mortgage in Portugal, here are some answers that will help you get started:
Can non-residents buy property in Portugal?
Anyone, regardless of their nationality or residence status, can buy property in Portugal. No matter where, the type or quantity of property – there are no limits.
This is valid for the purchase of a home for permanent residence, second homes, and rental properties.
How can a foreigner apply for a mortgage in Portugal?
The Portuguese banking system is well-prepared to support foreigners who want to invest in property in Portugal.
Thanks to the huge demand from international homebuyers over the last few years, today Portuguese banks provide easy access to mortgage loans, regardless of whether you live in Portugal or not.
Most banks have staff who speak foreign languages as well as extensive experience in supporting international clients and their specific needs.
When should I start looking for a mortgage in Portugal?
The answer to this question is very simple: the sooner, the better. Even if you are not yet sure where or what type of property you want to buy in Portugal, starting this process at an early stage will give you several advantages.
On the one hand, you can rely on an expert to help you understand how much credit you can borrow based on your financial situation and how much you will pay in the future. This information allows you to have a very real understanding of the value you may be prepared to pay for a property, helping you to search and select the best options for your budget and lifestyle.
If you want to buy a property to put on the rental market, having a realistic idea of the monthly instalment you will pay will also help you make the best financial decisions regarding the return you can expect.
Another benefit of starting the process early is that you will also know the costs involved in applying for a mortgage and the documentation needed to formalise the process, some of which has to be certified. It’s all a matter of saving time and keeping things simple and straightforward!
Which bank is the best for mortgage loans in Portugal?
Most banks in Portugal offer mortgage solutions for foreigners, with similar rates and quality of service. However, we suggest you request a simulation at different banks, as contractual conditions and costs may vary.
Among these, you should be especially aware of the spread rates charged, required insurance coverages or the need to undertake additional banking products which might not interest you.
By scheduling a meeting with a specialist mortgage consultant in any Portuguese bank, you will receive support understanding the costs and terms of your mortgage contract, as well as help with documents required and their translation.
What is the difference between fixed rates and variable interest rates?
The type of interest rate applied in a Portuguese mortgage is negotiated directly with the bank. There are two main types of mortgage rates: a fixed-rate, and a variable-rate.
With a fixed-rate mortgage the monthly instalment you will pay is always the same, protecting the borrower from fluctuations in Euribor, the main reference rate in the euro area. The duration of the fixed rate depends on the bank and the conditions agreed upon, and may be limited to a specific period of time or for the total duration of the loan.
With a variable-rate mortgage what you will pay monthly to the bank depends on fluctuations in the Euribor rate, which is normally updated every six months.
Although it is likely to pay less interest on a loan with a variable rate versus a fixed-rate loan, some people prefer the certainty of knowing their interest rate will always stay the same, regardless of Euribor rate increases. If you're unsure which rate to choose, it is best to discuss both options with your bank.
In both cases, if you choose to make advance payments you will be charged a penalty fee.
What is the maximum duration of a mortgage in Portugal?
The maximum duration of a mortgage in Portugal also varies from bank to bank, but is generally 30 years, as long as the age of the beneficiaries does not exceed 75 or 80 years at the end of the loan (depending on the bank).
This means that retirees can also take out a mortgage in Portugal, as long as they have a regular pension income and do not exceed the age limit set by each bank.
What is the maximum amount I can apply for?
The maximum amount you can apply for also differs from bank to bank, but is usually between 60% to 75% of the property's valuation.
As a general rule, non-resident buyers will be required to have capital to make a minimum down payment of 30% of the property's purchase value.
In case you are buying an off-plan house, which includes the cost of the plot and of the construction, Portuguese banks also provide financing solutions for these situations. The better qualified the property, namely in terms of location and being new, the easier it will be to have your mortgage approved.
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