Applying for a mortgage in Portugal can offer many benefits. Firstly, low interest rates make it an attractive option. Additionally, the long repayment terms provide flexibility. Moreover, it presents potential for investment and residency opportunities.
However, it’s important to do your research, understand the requirements and factors involved, and work with a reputable lender or mortgage broker to find the best mortgage option for your individual circumstances.
Benefits of taking a mortgage in Portugal
Long Repayment Terms
Mortgages in Portugal typically offer long repayment terms; in some cases, borrowers can extend up to 40 years. This extended duration can significantly contribute to making monthly payments more manageable, as it allows borrowers to distribute the loan cost over an extended period of time.
Stability and Predictability
Fixed-rate mortgages in Portugal offer stability and predictability, as borrowers have the option to lock in a fixed interest rate for the entire duration of the loan. Consequently, this enables borrowers to effectively plan their finances and shield themselves from unexpected fluctuations in monthly payments.
Investment Opportunity
Purchasing a property with a mortgage in Portugal can be a sound investment opportunity, as the country has a stable and growing housing market. Homeownership can also provide financial security and long-term wealth accumulation.
Types of mortgages in Portugal
Fixed-Rate Mortgage
Fixed-rate mortgages are a popular option for homebuyers in Portugal. Moreover, this type of mortgage allows borrowers to lock in a specific interest rate for the duration of the loan term. This means that borrowers can budget effectively for their monthly payments, ensuring that their payments will not fluctuate due to interest rate changes.
In Portugal, fixed-rate mortgages typically have a term of up to 30 years, and the interest rate is usually higher than that of variable-rate mortgages. However, borrowers who opt for fixed-rate mortgages benefit from the certainty and stability of a fixed monthly payment, which can make budgeting and planning easier.
Variable-Rate Mortgage
Variable-rate mortgages, also known as adjustable-rate mortgages, feature an interest rate that can fluctuate over time based on market conditions. This implies that borrowers’ monthly payments may change, potentially resulting in them paying more or less than they initially budgeted for.
In Portugal, variable-rate mortgages typically feature a lower interest rate compared to fixed-rate mortgages. Consequently, this can make them an appealing option for borrowers who are willing to take on more risk. However, variable-rate mortgages can be unpredictable; therefore, borrowers should be prepared for the possibility of their monthly payments increasing over time.
It’s important to note that some variable-rate mortgages in Portugal have a cap on how much the interest rate can increase over the life of the loan. This means that borrowers are protected from sudden and drastic increases in their monthly payments.
Interest-Only Mortgage
Interest-only mortgages are a type of mortgage where borrowers only pay the interest on the loan for a set period of time, typically between five and ten years. Consequently, during this period, the borrower’s monthly payments are lower than they would be for a capital and interest mortgage.
In Portugal, interest-only mortgages are less common compared to fixed-rate and variable-rate mortgages. However, they can still be a useful option for borrowers who aim to keep their monthly payments low in the short term. Nevertheless, they come with some risks that borrowers should consider.
After the interest-only period ends, borrowers will need to start paying both the principal and interest on the loan. Consequently, this transition can result in significantly higher monthly payments.
How to apply for a mortgage in Portugal?
Research Lenders
The first step is to research lenders that offer mortgages to foreigners in Portugal. You can use online resources, seek recommendations from real estate agents, or work with a mortgage broker.
Gather Required Documentation
Next, you will need to gather the required documentation, which typically includes a valid passport, proof of income, bank statements, and a credit report.
Submit Application
Once you have chosen a lender and gathered the necessary documentation, you can proceed to submit your mortgage application. Subsequently, this process typically involves providing personal information, employment details, and information about the property you wish to purchase.
Obtain a Mortgage Offer
If your application is approved, the lender will provide you with a mortgage offer that outlines the terms and conditions of the loan, including the interest rate, repayment schedule, and any fees or charges.
Property Valuation
Before approving the mortgage, the lender typically requires a property valuation to ensure that the property is worth the amount being borrowed.
Sign the Mortgage Agreement
Once the property valuation is complete, and you have reviewed and agreed to the terms of the mortgage offer, you will then proceed to sign the mortgage agreement.
Finalize the Purchase
After the mortgage agreement is signed, you can proceed with finalizing the purchase of the property. Consequently, this typically involves transferring the funds to the seller and registering the property in your name.
Portuguese Mortgage Rates
What is the maximum loan-to-value and down payment for Portuguese mortgage?
The loan-to-value (LTV) ratio for a foreigner in Portugal will depend on various factors. Notably, these factors include the lender’s policies, the borrower’s financial situation, and the property’s value.
In Portugal, foreigners are permitted to apply for a mortgage to purchase a property. Nevertheless, lenders may demand a higher deposit from foreign borrowers in comparison to Portuguese citizens.
Usually, lenders require a minimum deposit of 20% of the property’s value from foreign borrowers. In contrast, Portuguese citizens can secure a mortgage with a deposit as low as 10% or even 5% in some cases. Therefore, the maximum loan-to-value ratio for a foreigner in Portugal is typically around 80%.
For example, if a property is valued at €200,000, a foreigner may be able to borrow up to €160,000 (80% of the property’s value). Consequently, they will need to make a deposit of €40,000 (20% of the property’s value).
Portugal Mortgage Calculator
You can easily find online mortgage calculators specific to Portugal by searching on the internet. These calculators typically require you to input information such as the loan amount, interest rate, loan term, and any additional fees or charges. They then provide you with estimates of your monthly mortgage payments, total interest paid over the life of the loan, and other relevant details.
Many Portuguese banks and financial institutions also offer their own mortgage calculators on their websites, which may provide more accurate results tailored to their specific mortgage products and terms.
In a mortgage simulation, you would typically include the following variables:
- Loan Amount: The total amount borrowed for the mortgage.
- Interest Rate: The annual interest rate applied to the loan.
- Loan Term: The length of time over which the loan will be repaid (e.g., 15 years, 20 years, 30 years).
- Type of Interest Rate: Whether the interest rate is fixed or variable.
- Down Payment: The initial payment made by the borrower towards the purchase price of the property.
- Property Value: The total value of the property being purchased.
- Monthly Payment: The amount the borrower will pay each month towards the mortgage.
Best Portuguese mortgages for non-residents
The best Portuguese mortgages for non-residents can vary depending on individual financial circumstances, preferences, and eligibility criteria. However, some banks and financial institutions in Portugal are known for offering competitive mortgage options to non-residents. Here are a few that are often considered:
Banco Português de Investimento (BPI): BPI is one of the largest banks in Portugal and offers mortgage solutions tailored to non-residents. They provide personalized assistance and competitive interest rates.
Millennium bcp: Millennium bcp offers mortgage options for non-residents looking to invest in Portuguese property. They provide flexible terms and may offer attractive interest rates.
Caixa Geral de Depósitos (CGD): CGD is a state-owned bank in Portugal and offers mortgage solutions for non-residents. They may have specialized products and favorable terms for foreign buyers.
Novo Banco: Novo Banco provides mortgage options for non-residents interested in purchasing property in Portugal. They offer personalized service and competitive rates.
Santander Totta: Santander Totta offers mortgage solutions for non-residents, with various options to suit different needs. They may offer attractive interest rates and terms.
Costs of the mortgage in Portugal
When obtaining a mortgage in Portugal, there are several costs involved that borrowers should be aware of. These may include:
- Arrangement Fees: Around €300.
- Valuation Fees: Around €280.
- Notary and Registration Fees: Around €1,500
- Stamp Duty: 0,8% of property purchase cost
- Transfer tax. From 2 to 8% of the purchase property cost.
Documents to provide to get a mortgage in Portugal
Non-residents will typically need to provide the following documentation to support their mortgage application:
- Passport
- Portuguese Tax Number (NIF)
- Proof of Address (copy of the tenancy agreement)
- Credit report
- Last 3 pay slips
- Recent bank statements
- Most recent tax returns
- Floorplan of the apartment /house
Costs of buying property in Portugal
When buying property in Portugal, there are several costs to consider in addition to the purchase price. Moreover, here are some of the most common costs:
| Costs | |
| Property transfer tax – IMT (8%) | 15,438€ |
| Stamp duty (0,8%) | 2,800€ |
| Notary fees | 1,250€ |
| Registration fees | 250€ |
| Legal fees | 2,500€ |
| Total Costs | 21,988€ |
*IMT calculation: (350.000,00€ x 8%) – 12.562,06€ = 15.437,94€
Why to work with a mortgage broker for buying property in Portugal?
Access to a wider range of products
Different lenders, including those that may not be available to the general public. Additionally, this can help you find a mortgage product that best suits your specific needs and financial situation.
Expert advice and guidance
A mortgage broker can provide you with expert advice and guidance throughout the mortgage process, from helping you understand the different types of mortgages available to you, to helping you find the best mortgage rates and terms for your situation.
Time-saving
And, moreover, this mortgage broker can save you time by doing the research and shopping around for you, enabling you to focus on other important aspects of your life.
Understanding Foreign Clients
Also mortgage brokers who specialize in working with international clients, like those purchasing property in Portugal, possess a deep understanding of the unique challenges and considerations that arise in such situations.
Negotiating power and better terms
Those mortgage brokers have negotiating power with lenders, which can help you get better mortgage rates and terms than if you were to go to the lender directly.
Personalized service
A mortgage broker can provide you with personalized service and attention, helping you navigate the often complicated mortgage process and answering any questions or concerns you may have along the way.
No additional costs
Furthermore, those mortgage brokers have negotiating power with lenders, which can help you get better mortgage rates and terms than if you were to go to the lender directly.
This means that as a borrower, you generally do not have to pay any additional fees or charges for their services.
Still have questions? Check out our video!
For more videos about investing or moving to Portugal, explore our YouTube channel here: YouTube Channel Portugal Residency Advisors.
Why work with us?
At Portugal Residency Advisors, we collaborate with carefully chosen premium mortgage brokers in the market. We streamline the entire process of applying for a mortgage, handling all the paperwork from obtaining your NIF number to opening your bank account, and liaising with our mortgage partners on your behalf.
Working with us can save you time, effort, and even money in the long run. We’ll help you avoid common mistakes and pitfalls that many expats or first-time home buyers encounter, and provide peace of mind throughout the entire process. So if you’re ready to find your dream home, consider partnering with us to make the process smooth and stress-free.
Frequently asked questions about How to apply for a mortgage in Portugal as a foreigner
Can foreigners apply for a mortgage in Portugal?
Indeed, foreigners can apply for a mortgage in Portugal. Moreover, the process is open to both residents and non-residents.
What are the general requirements for applying for a mortgage in Portugal as a foreigner?
The specific requirements may vary between banks; however, generally, you will need the following: A valid passport, proof of income, proof of residence, and a Portuguese fiscal number (NIF).
Can I apply for a mortgage in Portugal before moving there?
Certainly, it is possible to apply for a mortgage before moving to Portugal. Additionally, many banks offer online application processes that allow you to initiate the mortgage application remotely. Alternatively, you can choose to work with a mortgage broker.
How much can I borrow for a mortgage in Portugal?
The amount you can borrow depends on several factors, including your income, creditworthiness, property value, and the loan-to-value ratio (LTV) set by the bank. Typically, banks may lend up to 80% of the property’s value for non-residents and up to 90% for residents.
What is the minimum down payment required for a mortgage in Portugal?
Typically, this minimum down payment requirement is around 20% of the property value for non-residents. Nevertheless, this may vary depending on the bank and the specific circumstances of the borrower.
Is it advisable to use a mortgage broker when applying for a mortgage in Portugal?
Using a mortgage broker can be beneficial, especially for foreigners navigating the Portuguese mortgage market. A broker can help you find suitable loan options, negotiate terms on your behalf, and guide you through the application process.
Can I get a mortgage in Portugal if I am self-employed?
Yes, self-employed individuals can apply for a mortgage in Portugal.
