mortgages in portugal

Mortgages in Portugal: The Ultimate 2022 Guide for Foreigners

It’s an excellent time to consider mortgages in Portugal. The Portuguese housing market is extremely solid with good potential for future growth. 

Getting a mortgage in Portugal is a great option, not only for financing your entire property purchase, but also when applying for a Portugal Golden Visa via the popular property route. 

Don’t forget that with the Golden Visa, there’ll be a minimum threshold that you’ll need to meet outright, without financing. But a mortgage can help you with anything beyond that.

That threshold ranges from €280,000 for a property in one of Portugal is low density areas, to €500,000 for a property anywhere in those regions still included in 2022’s Golden Visa program (such as Madeira).  

If your dream property is priced beyond the minimum Golden Visa threshold, then getting a mortgage in Portugal will allow you to top up your funds to the required level.

You’ll still be able to secure that all-important Portuguese residency permit, and start your journey to Portuguese citizenship.

I spoke to several banks and independent local mortgage advisors while researching this guide.

What’s more, I’ve recently been through the process of getting a mortgage in Portugal, so the information in this guide is based on up-to-date information and firsthand experience.

We’ll look at the different types of mortgages available in Portugal, the rates and fees, what you can expect from the process, and what documents you’ll need to prepare.

I’ll also provide several tips and tricks to help make your experience of getting a mortgage in Portugal smoother and easier than my own.

Is it difficult to get a mortgage in Portugal?

Getting a mortgage in Portugal as a foreigner can be surprisingly easy.

Even if you’re a non-resident, you’ll find many opportunities to secure a mortgage from Portuguese banks. 

If you’re a foreign retiree, you can get a mortgage in Portugal based on your regular pension income from overseas. You can also get financing on property purchases for commercial use, although banks will typically lend a maximum of 50% of the price.

But, as with any bureaucratic process, the devil is in the details. To avoid time wasting and frustration, it’s essential to go into the process with clarity on what’s involved.

I’d advise starting the mortgage process as soon as you can, even before you decide on a property to buy. This helps you know how much you can afford and how much the banks are willing to lend you.

Armed with this information, you’ll be far more efficient when negotiating with sellers, and able to move quickly when you find the perfect property.

Types of mortgages in Portugal 

Mortgages in Portugal come in two main types: fixed rate and variable rate. Virtually all mortgages in Portugal are principal plus interest loans.

Variable rate mortgages

A variable rate mortgage means your monthly payments may fluctuate depending on the base rates of the Euribor. Mortgage lenders in Portugal will typically revise your monthly payments every six months according to those base rates. Variable rate mortgages are the most common type of mortgages in Portugal.

Fixed rate mortgages

This mortgage allows you to pay back your mortgage at a consistent rate for a certain period of time, which protects you from future fluctuations in the Euribor.

Some banks may offer a fixed rate for the entire life of the mortgage, which can be up to 30 years, while others will offer it only for a certain period. After that period, it will revert to a variable rate. 

The Euribor

Mortgages in Portugal are linked to the Euribor (Euro Interbank Offered Rate), which is the index typically used for housing loans in Europe. The Euribor is based on the interest rates at which a panel of European banks borrow funds from one another.

How much deposit do you need for a mortgage in Portugal?

The key factor here is whether you’re a fiscal resident or non-resident.

Non-residents can typically access mortgages at a loan-to-value ratio of 60% or 70% of the valuation price. On the other hand, fiscal residents can get 80% or 90%.

By ‘fiscal resident’, we mean that you declare taxes in Portugal, spend over 183 days per year here, and have a local address that’s registered to your Portuguese NIF

It also helps if you receive your main source of regular income, such as your salary or pension in a Portuguese bank account rather than a foreign one. Some mortgage advisors will tell you this doesn’t matter, but personal experience has shown me otherwise.

Several banks in Portugal, such as Santander, decide the minimum deposit amount based on your citizenship (i.e. Portuguese citizens can access more credit than foreign citizens).

Banks offering mortgages

At least 15 Portuguese banks offer mortgages. Here are some of the ones I’ve spoken to.

  • NovoBanco
  • Caixa Geral 
  • Santander
  • Millennium
  • UCI
  • Bank Inter 

Mortgage costs and fees

Buying property in Portugal comes with a lot of associated costs. Getting a mortgage in Portugal is no exception. 

Here are some of the mortgage-related fees you may have to pay (these may vary according to lender):

  • Deed registration: 1%
  • Mortgage arrangement: 1%
  • Mortgage administration: 1%
  • Non-refundable commitment fee: around €600
  • Survey and appraisal: €500–€800
  • Legal fees (optional): at least €1,000

Example property purchase costs 

  • Property tax (IMT): ranges from 2% to 8%
  • Stamp Duty Tax (IMI): 0.8% of the property price
  • Notary, registry, and tax office fees for property deeds: €1,200
  • Legal fees: €1,800 (approx.)

Documents required

Portuguese banks will require a number of documents when you apply for a mortgage.

Here’s a list of the basics (but some banks may ask for additional documents).

  • Passport copy
  • NIF (Portuguese tax number)
  • Proof of income (such as payslips or tax returns)
  • Personal bank statements for the last three months (I recommend getting your regular income paid into your Portuguese bank account rather than a foreign one)
  • Proof of address (i.e., recent utility bill, or rental contract)
  • Recent mortgage statement (if you have other mortgages)
  • Proof of savings or investment accounts (to prove you have the required capital for the deposit)
  • Bank reference letter (not all banks ask for this, but some may)
  • Purchase commitment (of the property you intend to buy)
  • Proof of your credit score in your home country (such as a ClearScore report if you’re from the UK)

For employees:

  • Last three months of payslips
  • Copy of permanent employment contract / reference letter from your employer (should include how long you’ve been at the company, state the fact that you’re a permanent employee, and state how much your gross annual salary is)

For self-employed:

  • Last year’s tax return
  • Last three months of bank statements from your company
  • Three years of company profit & loss and balance sheet

For retirees:

  • Confirmation of pension income for last three months

How to apply for a mortgage in Portugal

The best way to get started is either by approaching an independent mortgage broker or going through your current Portuguese bank.

If you bank with Millennium, as many foreigners in Portugal do, they have good mortgage advisors and will offer loan-to-value ratios of up to 90%, if you’re a fiscal resident. 

Need a bank account with Millennium? Check out Bordr’s convenient online service.

As a fiscal resident, it’s generally quite easy to get at least 80%, so if your bank offers less than that you should look elsewhere.

Non-fiscal residents will probably be restricted to a maximum of 70% loan to value.

I can recommend several independent mortgage brokers that I’ve worked with. They speak good English, are used to dealing with foreign mortgage applicants, and have good knowledge of the broader mortgage landscape in Portugal. Get in touch for a recommendation.

The banks pay them commission for each successful mortgage, so their service to you is free of charge.

Here’s an overview of the typical steps in the process for getting a mortgage in Portugal. 

Step 1: Initial assessment and simulations

The broker or bank will provide an initial assessment based on your income, to give you an idea of how much you could borrow. If you’re going through a broker, they should give you simulations from a number of different mortgage providers. Independent brokers usually don’t charge for this service.

Step 2: Submitting the application

Once you’ve chosen the mortgage you like best, you’ll need to fill in an application form and submit all required documents to the bank for approval. In many cases, you’ll already have found a property that you want to buy at this point.

Note: If you’re working with an estate agent, they will likely require you to pay a portion of the deposit at the moment of signing the promissory contract. 

Many agents will be quite pushy at this point to get you to sign this contract quickly. This is because their commission typically comes from the initial portion of your deposit. 

Don’t let them hurry you; take your time and review everything carefully.

Make sure there are clauses in the promissory contract stating your deposit will be refunded if 1) the valuation is too low, 2) or you fail to get a mortgage. It’s worthwhile asking a lawyer to review the promissory contract before signing it.

Step 3: Mortgage offer

Once the bank approves your mortgage, they’ll send a formal offer. You’ll have time to review the conditions of the offer with your broker. Make sure to take your time and review everything in detail, and don’t hesitate to ask questions about anything you don’t understand.

Step 4: Valuation report

Once the offer is made, then the bank will arrange a valuation of the property in question. This will happen via an evaluator sent from the bank. Ideally, the valuation will be at least the purchase price. If it falls below this, then you’ll have to make up the shortfall from your own capital. 

Step 5: Transfer of funds 

Finally, you’ll need to transfer the funds to the sellers account before the completion date. A completion date is typically arranged once you have proven the funds are available.

Step 6: Completion

The mortgage lender arranges the full payment, then you sign the deed in front of the notary and pay the associated fees and taxes. Once that’s done, you’re officially the new owner of the property.


FAQs: Mortgages in Portugal

Can a British citizen get a mortgage in Portugal?

Yes, British citizens can easily get a mortgage in Portugal. There are no restrictions by nationality.

Can retirees get a mortgage in Portugal?

Yes, retirees can get a mortgage in Portugal with proof of sufficient regular pension income.

Can businesses get mortgages in Portugal?

Yes, businesses can get mortgages in Portugal, but the maximum mortgage rate is typically 50% of the price.

Can I get a mortgage for construction in Portugal?

Yes, you can get a mortgage for construction in Portugal. This will usually be 50 to 60% of the total cost of the land and property. We can put you in touch with a mortgage broker to discuss this in more detail.

What’s the age limit for getting a mortgage in Portugal?

The age limit for getting a mortgage in Portugal depends on the bank. It’s usually up to 70 years old, but some banks offer mortgages for applicants up to 80 years old. However, this means the length of your mortgage will be shorter.

What’s the loan term for non-fiscal residents?

The loan term in Portugal for non-fiscal residents is typically up to 30 years, depending on your age.

Do I need life insurance to get a Portuguese mortgage?

Most banks require you to have life insurance in place before you take out a mortgage, especially if you’re an older applicant or you have certain medical conditions. Life insurance policies in Portugal are usually inexpensive. You can take one out through your bank, or through an insurance broker.

Can I repay my mortgage early?

Yes, you can repay your mortgage early, subject to an early repayment fee. This is set by the Bank of Portugal. You’ll pay 0.5% for a variable rate mortgage and 2% for a fixed rate one.

Can I use a mortgage to buy property for the Golden Visa?

For the Golden Visa, the minimum investment must be made upfront, without a mortgage. But you can use a mortgage to top up the amount beyond the minimum investment threshold.

Conclusion

The process of getting a mortgage in Portugal isn’t as difficult as some may think.

In fact, it can be quite easy for foreigners to get a mortgage here, especially if you’re already a resident.

There are many different banks in Portugal that offer mortgages to foreigners, but some are definitely better than others.

We especially recommend NovoBanco, Caixa Geral and Millennium BCP.

It’s also a good idea to seek advice from a reliable mortgage advisor who understands the market well.


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