Portugal A basic guide to Portuguese mortgages

Eligibility & criteria
Porto, Portugal All mortgages are in Euros and will be secured against Portuguese residential property. Portuguese mortgages are full status and therefore proof of income and outgoings will be required to submit an application to a lender.

The maximum loan to value available is 80% of the purchase price.

Portuguese lenders assess eligibility on the applicant's capacity to repay the mortgage. As a guideline, your existing monthly outgoings as well as the monthly repayment on your new Portuguese mortgage should not exceed 35% of your net monthly income. A percentage of any rental and investment income you receive can also be considered. Mortgage, rent, personal loans and maintenance commitments are all considered as outgoings. To find out how much you can borrow complete our quotation request form.

Portuguese lenders will consider applications in the name of an Offshore Company. This is not widely available and will be at the lender’s discretion. If you would like to purchase in the name of an Offshore Company please advise us, as this will affect the products we are able to quote you.

Types of mortgage
Mortgages can be obtained for the purchase of off-plan, new and existing properties.

For construction loans, plans must be provided at the time of application. Funds will be released by the lender directly to your builder in accordance with the plans and following the bank’s valuation to ensure the agreed stage has been reached.

You can raise capital on your Portuguese property and the amount you can borrow will be determined by a valuation arranged by the lender.

Remortgaging is available. However, this will incur costs both at the Notary’s office and with the new lender. We recommend that you check with your existing lender if any penalties will be payable for cancelling your existing mortgage and corresponding land registry deed.

Mortgage products
A variety of products are available. Both interest-only and repayment mortgages can be arranged, on a variable or fixed-rate basis, or a combination of both. Terms can be from 10 to 30 years however loans must be repaid by the age of 80. Many of our products do not have any early redemption penalties. For an idea of the rates available see our Best Buy Tables, or for a personalised quotation complete our quotation request form.

Documentation required by the lender
Lenders are required to have sufficient documentation proving that the borrower can afford the mortgage repayments and you will therefore be required to submit a number of supporting documents. Please see below for a summary of what will be required. A detailed list will be compiled based on your situation and sent to you with your personalised quotation.

You will need:

Proof of identity & residence
Proof of income & outgoings
Bank statements
Property details

Timeframe
An Agreement in Principle can be obtained from a lender once all of the necessary documentation has been submitted. This takes approximately five working days. However, for loan amounts in excess of €750,000 this may take longer.

We would recommend that you allow a minimum of eight weeks from application to the lender to completion.

Life assurance
Life assurance is not mandatory in Portugal. However if you would like to receive a quotation for life cover please ask your Consultant to recommend a provider.

Buildings insurance
Buildings insurance must be in place for completion. Most lenders offer buildings insurance and if their provider is not used, they will require proof prior to completion that the policy has been assigned to them. Please ask your Consultant if you would like to be referred to a specialist overseas insurance provider.

Bank account
You will need to open a Portuguese bank account before completion, from which your mortgage repayments will be debited. Most lenders insist you open an account with them. If this is not the case then we will advise you so that you can open an account.

Payment of your Portuguese mortgage
Please be aware that missing a mortgage payment in Portugal may have serious consequences and we therefore strongly advise you arrange for monthly debits from a UK account. A number of foreign exchange providers offer a renewable 12 month regular payment plan. The exchange rate is fixed at the start of the plan, and the agreed amount will be debited from your UK account and sent to your Portuguese account each month. This service gives you peace of mind in the knowledge that your Portuguese mortgage repayments will be met automatically each month. Please ask one of our Consultants to recommend a provider if this is of interest.

Transferring funds to Portugal
Whilst purchasing a Portuguese property it is also likely that you will need to transfer funds to Portugal, to pay a reservation fee, a deposit on the property, or to cover additional purchase costs.

Making payments in a foreign currency will mean you are exposed to movements in exchange rates. This is likely to affect the final cost of the property you are buying, as will the exchange rate you receive when you make the transfer.

Through our carefully selected foreign exchange provider we are able to not only save money on the exchange rate you receive but reduce your exposure to exchange rate movement.

For further information on how these services can benefit you please talk to your consultant who will be able to answer any questions you may have.

Completion
Either a representative from the bank will be present to issue the cheques, or a transfer will be made following completion. You do not have to be present at completion and can give Power of Attorney if necessary. Your lawyer will be able to discuss this with you in more detail.

Costs of setting up a Portuguese mortgage
Bank’s arrangement fee – this can be in the form of an application fee and a cost on completion, and varies from lender to lender. We would recommend you allow a minimum of €175 and up to a maximum of 1% of the loan amount to cover this.

Notary fees and taxes - payable at approximately 10%. If you take out a Portuguese mortgage a further cost will be passed on to you by your Lawyer for registering the lender’s charge.

Valuations – these are carried out by the lenders and payable by the borrower. The valuation fee is approximately €175, but does vary from lender to lender and depends upon the size of the property you are buying.

We charge a non-refundable application fee of £200. A further fee may be payable upon completion of the mortgage. Please refer to your personalised quotation for confirmation.

We recommend that you seek professional legal & tax advice before purchasing in Portugal.