How to get a mortgage in Portugal as an international buyer
Portugal’s sunny climate, beautiful coastlines and welcoming residents make it a sought-after destination for property buyers from around the world. Here’s an in-depth guide to help international buyers navigate the process of obtaining a mortgage in Portugal.
Getting a mortgage in Portugal
As an international buyer, getting a mortgage in Portugal is a relatively straightforward process. Non-residents can typically borrow up to 70% of the property’s value, although this can vary by lender.
On average, it takes a few months to secure a property in Portugal, including the necessary paperwork and signing of contracts.
Most Portuguese banks will not offer mortgages to individuals aged 70 or above. However, some lenders will extend this limit to 80 years old.
Types of mortgages available in Portugal
There are mainly two types of mortgages available in Portugal: fixed-rate and variable-rate mortgage.
Fixed-rate mortgage
Fixed-rate mortgages offer the security of a constant interest rate over a set period. This option is popular among buyers who seek stability in knowing exactly how much they will pay.
Variable-rate mortgage
A variable-rate mortgage fluctuates with the Euribor (Euro Interbank Offered Rate). Some banks may also offer mixed-rate mortgages, combining features of both fixed and variable rates. The maximum loan-to-value mortgage is between 60-70% of the purchase price.
The mortgage term for non-residents is usually between 25 and 30 years.
How much can you borrow on a Portuguese mortgage?
Non-residents in Portugal can obtain mortgages from Portuguese banks, although the loan conditions differ from those for fiscal residents.
Non-residents can borrow 60-70% of the property’s total value. In contrast, fiscal residents can borrow up to 90% of the sale price.
Bear in mind that this is a percentage of the property price. The buyer will also need to pay an additional 8- 10% on top of the property price in essential purchasing costs, e.g. property tax (IMT) and these cannot be included in the mortgage.
When applying for a Portuguese mortgage, it is generally best to apply for the maximum amount with the bank initially. You can always choose to borrow less, but it will be harder to increase the mortgage if it’s not enough for you.
Deposits
If you choose to purchase with a Portuguese mortgage, you will need to bear in mind that banks require a minimum 30% deposit from non-Portuguese nationals. This deposit will be based on the Loan-to-Value (LTV) of the property, not its sale price. You may also find that there is less choice available to you, which makes it prudent to discuss your options with an overseas mortgage broker when you can.
Documents required for a Portuguese mortgage
To apply for a Portuguese mortgage there are several documents you’ll have to submit. The required documents are as follows:
- Copy of passport
- Proof of income
- Bank statements (last 60 days)
- NIF number
- Recent utility bill
- Recent mortgage statement
- Proof of any other savings or investments
- Bank reference letter
- Property details (purchase commitment or sales contract)
If self-employed, you may need to show the last two to three years of tax returns.
It’s essential to have all your documents translated into Portuguese and certified before you apply.
Mortgage application process
The typical mortgage application process for non-residents is as follows:
- Initial assessment: After an initial assessment, if you proceed, you will receive a mortgage quote within 24-48 hours. There is normally a charge for a formal quote to be drawn up.
- Submit application: Once you’ve received a formal quote, you will complete the relevant application form and submit your supporting documents.
- Mortgage offer: If your mortgage is approved, you will receive a formal offer. Your broker will be able to confirm the conditions of the offer and kickstart the next steps.
- Valuation report: After receiving your formal offer, the bank will carry out a valuation report of the property. If the valuation is at least the agreed property price and the property is free from legal issues, the date and details of the property purchase will be confirmed.
- Completion arrangements: The funds for the property purchase must be readily available and transferred to the correct account before completion day. Once you have proven that funds are available, the lender will proceed with the application and a competition date will be set.
- Completion: Your Portuguese lender will arrange the payment. Once the property and mortgage deeds are signed in the presence of a notary and all fees and taxes are paid, then the property is yours.
Put me in touch with a trusted overseas mortgage broker to discuss my options in detail
Tips for securing a good mortgage rate
To secure a favourable mortgage rate in Portugal, it’s advisable to maintain a strong credit profile and compare offers from multiple banks. If you’re not confident doing that, consider hiring a mortgage broker as they may have access to more lenders. Additionally, building a relationship with a local bank and providing a larger down payment can also lead to better rates.
Remember, mortgage laws and market conditions can change, so it’s important to consult with a financial advisor or a real estate expert in Portugal for the most up-to-date advice.
