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Overseas investment – how do you get a mortgage in Portugal?

Portugal has long been a popular destination for Brits to retire to or have a second home in, while an increasing number of younger professionals and digital nomads are also choosing to base themselves permanently in a country that is one of the safest in the world, with good weather, food and wine other potential attractors.

But how easy is it to get a mortgage in Portugal? Here, Cristina Guimarães, Ideal Homes Portugal’s in-house mortgage adviser, runs through the requirements to obtain a mortgage in Portugal and what you can expect in terms of interest rates, term length and how easy the process is.

What does a client need to start the process?


“Firstly, we send over a mortgage pack with all the information and documentation you will need to secure a mortgage,” Guimarães says. “We also pre-qualify you, using an enquiry form to get all your personal details: your age, income, expenses, etc.

“If you know the purchase price you’re aiming for already, we know whether or not the bank will finance that. If you’re not sure about your budget, we can give you an idea of affordability, so that you won’t be looking for something out of your price range.”

Guimarães says Ideal Homes Portugal works with all the country’s major banks. One of the lender’s finances 80% up to the age of 80 years old and the others finance 70% up to the age of 75 years old.

“The way the banks work it out is they go from the oldest candidate. So, for example, if you’re 60 years old, you can take out a mortgage for 20 years,” she says.

For an 18-year-old looking for a mortgage, the maximum term would be 40 years. The minimum age for applying for a mortgage in Portugal is also eighteen, like in the UK.

What are the rates like at the moment?

Very low, according to Guimarães, at under 1% presently. Rates have been like that for a long time with no prospect for future change anytime soon.

“On a variable rate, it’s currently under 1%,” she explains. “There’s also the fixed rate. The longer you fix the rate for, the higher the rate. The average fixed rate is currently 1.7%.”

Guimarães adds that, by law in Portgual, there is an early repayment fee, which is 0.5% for a variable and 2% on a fixed rate. “This means that for every €10,000 euros you pay off, you’d be charged €50,” Guimarães states.

Angela Worrall, chief executive of Ideal Homes Portugal, says: “When I recently paid a chunk [of my mortgage] off, it didn’t really affect me. Didn’t really cost me any money, as such. It was worth doing.”

What does the process include?

“Once you’ve got a purchase price in mind or been pre-qualified and we’ve received the pre-approval, we ask for your documentation,” Guimarães advises. “The normal six months of bank statements, payslips, credit reports, etc. One of the requirements is a Portuguese tax number, which your lawyer can sort. Once we receive the documentation, we will send it to all the banks we work with.”

She adds: “Once we get the approval, the next step is opening up the bank account, which the bank will do for you. The first fee for the valuation fee is just over €239. The bank will contact an independent valuer to value the property. The bank that lends up to 80% requires life insurance, while for the other banks, life insurance is not mandatory.”

Once the valuation report is received, the bank will issue the final offer letter. “From there, there’s a seven-day reflection period and then we book the deed,” Guimarães says. “It’s a fairly simple process and here at Ideal Homes we can do it all for you.”

Guimarães says that even if a client thinks their situation is a little bit different and complicated, such hurdles can usually be overcome.

“If you send us all your information, we can find a way. The way the banks work it out is based on your income and expenses – expenses being loans. Car loans, credit cards, existing mortgages, any loans that you’ve got including the finance in Portugal cannot exceed 35% of your income,” she explains.

“Even if you’re situation is a bit more difficult or different, we can guide you in the right direction. You might not be able to purchase now, but we can advise on how you can work towards getting a mortgage.”

  • icon

    Think twice on anything off plan, 3 years down the line and your circumstances may have changed which will affect their initial decision.


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