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Buying Guide – Portugal

Lending criteria

Mortgages are available in GBP, USD, Euro, Yen, CHF, AUD, NZD, CAD, HKD or SGD and will be secured against Portuguese residential property.  Portuguese mortgages will require full disclosure of income, outgoings and savings.

The maximum loan to value available is 70% of the purchase price, or valuation, whichever is the lower.

Portuguese lenders assess eligibility on the applicant's capacity to repay the mortgage, as well as recent credit history.  As a guideline, your debt to income ratio should not exceed 35% of your gross monthly income; however there may be a degree of flexibility in this for certain types of applicant.  Mortgage, rent, personal loans and maintenance commitments are all considered as outgoings.  To find out how much you can borrow and for a formal decision in principle, click on Apply Now.



Types of mortgage

Mortgages can be obtained for the purchase of new or existing properties, or for refinance/remortgage.   

Renovation and construction loans are available, however estimates will be required at the time of application, and clients must have obtained all the necessary authorisations. Once the mortgage has been approved, funds will be released by the lender directly to your builders following submission of invoices.  The property must be classified as ‘habitable’ before a lender will consider an application for a renovation loan.  In the case of construction loans, more detailed information on the project will be required, so please contact us.



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 5 to 25 years; however loans must be repaid by the age of 70.  Many of our products do not have any early redemption penalties.  For an idea of the rates available please contact us, or for a personalised quotation by clicking on Apply Now.

 

Documentation you will be required to provide

Documents will need to be either original or certified copies. Items such as passports and driving licences will need to be in date at the time the mortgage is due to complete or close.



Timeframe

We will issue a decision in principle within 48 hours of receiving a fully completed application. 

The processing time from the application being received by the lender to completion or closing is approximately 6 weeks.



Life assurance

Life assurance is not compulsory in Portugal. However if you would like to receive a quotation for life cover please contact us and we will recommend a provider to organise an illustration for you.



Buildings insurance

This is a compulsory part of the mortgage process, and can normally be taken through the lender or via an approved third party insurance company. This will need to be in place for when the mortgage completes or closes 



Bank account

You will need to open a Portuguese bank account before completion, from which your mortgage repayments will be debited. This can also be used for utility bills, taxes etc. We can assist you in opening 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 your local bank 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 local account and sent to your Portuguese account each month. This service gives you peace of mind in the knowledge that your mortgage repayments will be met automatically each month. Please contact us to recommend a provider if this is of interest.



Transferring funds to Portugal

Whilst purchasing your 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 contact us and we will be able to answer any questions you may have.

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

Taxes - you will have to apply for a fiscal number, (numero fiscal de contribuente), the equivalent of a national insurance number, from the local tax office. Your solicitor can arrange this for you.

Once all conditions as set out in the original contract have been met, the final deed is drawn up and signed by both parties at a public notary office (the notario). You must pay a transfer tax called IMT (imposto municipal sobre transmissões onerosas) before the purchase goes ahead.


Autarquica - annual municipal tax, the rates are based on valuations determined by tax authorities and as a general rule are much lower for older properties. The rates are fixed by each municipality 0.8% on land and 0.7% - 1.3% on buildings.

The notario will witness the signing of the final deed and the “escritura” is registered at (Conservatória do Registo Predial, the local land registry office, and at the local tax office (Repartição de Finanças).
Bank’s arrangement fee: Typically 1.0% of the loan amount

Valuation fee – will vary depending upon the purchase price of the property

Legal fees – approx 1% to 2%

Notary fees – your Notaio can provide you with a breakdown of the fees payable on request.

Buildings insurance – There are three types of insurance to consider when arranging a Portuguese mortgage. The first is general house and contents insurance. This is a legal requirement of Portuguese mortgages and the lender must appear as the beneficiary of the house insurance. The amount of insurance required will be established by the valuation, and the insurance value will not be the same as the value of the property. The insurance value is the amount required to rebuild the property, clearly that will not include the value of the land as that would still exist. The other two types of insurance are life insurance and mortgage insurance. In both these cases insurance is not mandatory (as it is for house/building insurance), however it is worth considering them as not only is it important to have appropriate insurance cover but it will also help when negotiating better conditions for your Spanish mortgage. The costs of the insurance are based on your age and the loan amount and can vary from bank to bank.

We charge a non-refundable application fee of £150.00.  A further fee may be payable on 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

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. Be sure that you can afford the repayments before entering into any credit agreement. Any quotation supplied is not an offer of mortgage and may be subject to a change without notice. Exchange rate movements may increase the Sterling or home currency equivalent of your liability under a foreign currency mortgage.