How To Get a Mortgage in Portugal

When coming from abroad and attempting to settle into a new home through arranging a mortgage, there is much to know beforehand. This is no different with Portuguese mortgages.

In this article we’ll be taking you through the benefits of getting a mortgage in Portugal. As well as this, the different types of mortgages on offer. Let’s begin with some of the main benefits of obtaining a mortgage.

Benefits of Getting a Portuguese Mortgage

There are many benefits to getting a mortgage, and many can be a perfect fit for you depending on your circumstances. Below are some of the main benefits of getting a mortgage in Portugal.

Most Common Financing Route

When it comes to financing a home in Portugal, a mortgage is easily the most common financing route. This means there is plenty of information available to assist with the process should you proceed head on with the mortgage process.

Lenders Are More Interested in Foreigners  

In Portugal, unlike some other nations around Europe, lenders are keener on lending to those from abroad. This means that if you’re currently a non-resident of Portugal, you have the advantage of lenders already seeming more keen from the get-go in the lending process with you.

No Property Restrictions

Unlike many other nations, Portugal allows for properties to be rented out by the owner. Therefore, if you’re purchasing property and looking to rent it out to a potential tenant, that door is open to you.  

Mortgage Instalments Are at All-Time Lows

In comparison to some other countries around Europe, Portugal’s mortgage installment rate is at an all-time low. This makes the repayment process that little more simple and less stressful than in other countries.

Different Types of Mortgages in Portugal

In Portugal there are mainly two different types of mortgages one can get. Below we have listed the characteristics of the two.

Variable-Rate Mortgage

In Portugal, it’s usually standard that mortgage customers are required to have between 20-30 percent of the price it costs to buy the property they’re looking to start a mortgage on. This rate means that in most cases, banks are willing to loan up to 70-80 percent of the price of the property for non-Portuguese residents.

Fixed-Rate Mortgage

If a variable-rate mortgage isn’t your style, then a fixed-rate may be the one for you. At its core, a ‘fixed-rate’ mortgage refers to a mortgage that has a set rate of interest throughout the entirety of the repayment period. It makes room for the customers to decide on a 1-15 year fixed-rate option, with it returning back to variable repayments through instalments.

How to Get a Mortgage in Portugal

Now that some of the options are out of the way, how do you actually get a mortgage? Below we’ve listed some steps and aspects to getting a mortgage that can help you get sorted out.

Compare the Banks

One of the most important aspects when considering a mortgage is the bank you choose to get your loan from. Here is the list of the things to look out for when looking to choose the right bank for you.

  • If you’re entering a mortgage then it’s important to consider that there are quite a few banks that don’t consider renting.
  • Some banks are more interested and lean towards certain aspects of income streams from a customer than other banks.
  • There are plenty of banks that don’t offer fixed rates on their products.
  • In terms of interest rates, there may be lenders who have lower interest rates, but then as a result you can only borrow a certain amount from them.

Apply for a Portuguese Mortgage

Obviously, you’ll need to actually apply for a mortgage. This is required and despite what some people think, you can actually apply for a mortgage before you have even purchased a property in Portugal.

Required Documents To Apply for a Mortgage in Portugal

When applying it’s important to know what you will need in order to get through the application process of your mortgage. Below are some of the documents to consider getting a hold of: 

  • A document highlighting the details of the property you are interested in purchasing in Portugal
  • A recent utility bill, usually within the last six months
  • A valid proof of any prior savings you have had or investments you’ve made.
  • A reference from your bank and a collective of the last two months of incomings and outgoings through bank statements
  • A document proving the income you claim to have been receiving
  • A Portuguese tax number (NIF)
  • A copy of your passport

These document requests may vary depending on your employment status also, for example:

If Self-Employed (classifies as holding 20% or more of a share within a limited company):

  • A tax return of the company from the previous year
  • Bank statements proving the last three months’ incomings and outgoings from the business
  • A balance sheet clarifying the last 3 years worth of profit and losses relating to the company

If Employed:

  • A tax return from the previous year
  • A letter from your employer as a reference
  • Proof of your payslips from your employment from the previous three months worth of work

Applying for a Mortgage

As for applying for the mortgage itself, there are a few steps. Below is a number of steps you should follow when applying for a mortgage after the initial assessment:

Obtaining a Quote

Once you have had your initial assessment completed, you’ll receive a mortgage quote within up to 48 hours. Quotes usually come with a fee, though.

Application Submission

Once you’ve received the quote, you should then go through the steps of filling out the application form and supplying any documents to support your application in the process.

Receiving a Mortgage Offer  

If your mortgage is then approved after the application submission, you’ll receive an offer. The broker you’ve chosen to proceed through this process with will assist you with the proceedings.

Completion Process

This is the step where the funds to purchase the property in question are to be ready to be transferred. This will require proof of the transferring of the funds and once this is done the completion date will be decided.

Final Step

After all the previous steps have been completed without difficulty, your lender will arrange the payment for you. This will then lead to all the deeds being signed and all the fees being paid, and thus, you’ll then officially own the property.

Costs to Get a Mortgage in Portugal

Below are just some of the fees involved in applying for, getting assistance with and of course, a value of the mortgage.

General Fees

Generally, the pricing range for a mortgage in Portugal ranges between €290-350 for the services of a mortgage advisor. If a mortgage is successfully brought to completion, this fee is usually returned to the client though.

Bank Application Fees

Generally this fee could be around the equivalent of £170, or it could be approximately 0.5 percent the amount of the total of the loan you’re asking for. This will generally be subsided if your bank is not able to find an offer to give you.

Valuation Fees

The price for a valuation on a mortgage usually ranges between €175-500. However this does range up and down depending on the circumstances of your application and mortgage process.

Frequently Asked Questions

What types of mortgages are there available in Portugal?

In Portugal you can apply for either a fixed-rate mortgage or a variable-rate mortgage.

Is it Important to compare banks when applying for a mortgage?

Yes, it’s. Comparing banks is one of the most vital aspects prior to applying for a mortgage. Each bank is unique and will offer different outcomes if you were to go through the process of getting a loan from them for your mortgage. For example, some banks may offer lower interest rates, but will lend less as a result.

What documents do I need when applying for a mortgage?

This may vary depending on whether you’re employed or self-employed, but these are just some of the documents you may be required to provide: document stating property in question’s details, recent utility bill, valid proof of savings or investments, a bank reference along with recent bank statements, proof of recent income, Portuguese tax number and a copy of your passport.

How much does the process of getting a mortgage cost?

The general fees for the use of a mortgage advisor range between €250-300. As well as this, the bank application fee is usually around €150 or 0.5 percent of the amount of the loan you are requesting. Lastly, for a valuation fee, it usually costs between €175-500 depending on the circumstances.

Is it difficult to buy property in Portugal?

No, it’s not. On the contrary, it’s an easy and straightforward process if you follow the right steps. You can check out our Buying Property in Portugal guide for more information.

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