How to Get a mortgage in Portugal as a foreigner is very common. Portuguese banks offer mortgages both to residents and non-residents of Portugal. There are many advantages to buying a property in Portugal. Some of these include the relatively low real estate prices and little to no restriction on foreigners acquiring property.
It is easy for foreigners to get a mortgage if they plan on buying a property in Portugal. Most local lenders are well acquainted with the process. People can get mortgages for all types of real estate including residential, commercial, industrial, etc. Regardless of if you’re buying a home, a shop, or a restaurant, you can leverage your investment for 25 to 30 years with competitively low-interest rates.
When to Start Your Mortgage Journey in Portugal ⏳
It’s a common misconception that you should only start the mortgage process once you’ve found the perfect home. In reality, you should begin the application process as early as possible, even before you start property hunting. Getting pre-approved for a mortgage gives you a clear understanding of your budget, making your property search more efficient and demonstrating to sellers that you are a serious and prepared buyer. This also gives you time to gather all the necessary documents and resolve any potential issues without the pressure of a looming deadline.
Navigating Portuguese Mortgage Options
When looking for a mortgage, you’ll encounter two primary types:
- Variable-Rate Mortgages: The interest rate on these loans is tied to a benchmark, most commonly the Euribor (Euro Interbank Offered Rate), plus a fixed spread set by the bank. Your monthly payments can fluctuate, rising or falling with the Euribor. This option can be appealing if rates are low, but it carries the risk of increased payments if rates go up.
- Fixed-Rate Mortgages: With this option, your interest rate and monthly payments remain constant for a set period, typically 1, 5, 10, or even 30 years. This provides stability and predictability, making it easier to budget. While the initial rate may be slightly higher than a variable rate, it protects you from future interest rate hikes.
A third, less common option is a mixed-rate mortgage, which combines both fixed and variable periods. For example, you might have a fixed rate for the first 5 years, then switch to a variable rate for the remainder of the term.
Understanding Loan-to-Value (LTV) and Your Down Payment
The Loan-to-Value (LTV) ratio is a crucial factor for foreign buyers. This is the percentage of the property’s value that the bank is willing to finance. For non-residents, the LTV is typically lower than for Portuguese citizens, generally ranging from 60% to 80%. This means you will need a down payment of at least 20% to 40% of the property’s purchase price. Banks will base this LTV on the lower of either the purchase price or the bank’s official property valuation.
Choosing the Right Lender: A Comparison Guide
Portugal has a number of banks that are experienced in working with foreigners. While you can approach them directly, it’s highly recommended to use a mortgage broker who specializes in the Portuguese market. A broker can compare offerings from various banks and negotiate on your behalf. Some of the most common banks for non-resident mortgages include Novobanco, Santander, and BPI. Each has different lending criteria, interest rates, and customer service models, so a broker can help you find the best fit for your financial profile. Learn more about the benefits of working with a mortgage broker. For detailed information on specific banks and their offerings, you can explore resources like Portugalist’s guide to Portuguese banks
The Complete Document Checklist for Foreign Buyers 📝
To streamline your mortgage application, it is essential to have all your documents ready. The key requirements include:
- Personal Identification: A valid passport and your Portuguese NIF (Número de Identificação Fiscal).
- Proof of Income: This typically includes your last three to six months of payslips or, for self-employed individuals, detailed business accounts and tax returns from the last two to three years.
- Financial Records: Recent bank statements (usually from the last three months) from all your accounts, as well as a credit report from your home country.
- Tax Documents: Your most recent income tax return.
Having these documents prepared and in order from the start will significantly reduce delays in the application process.
Deconstructing the Mortgage Application Process
The mortgage application in Portugal follows a logical, step-by-step path:
- Initial Contact: Consult with a mortgage broker or a bank to get a preliminary assessment and a pre-approval estimate.
- Document Submission: Provide all the required personal and financial documents.
- Property Valuation: Once your offer is accepted, the bank will commission an independent valuation of the property to confirm its market value.
- Final Approval & Offer: The bank reviews all information and, if everything is satisfactory, issues a final mortgage offer.
- Signing the Deed: This is the final step, where you, the seller, and the bank representative meet with a public notary to sign the final deed and mortgage contract.
The Hidden Costs and Associated Fees
Beyond your down payment, you must budget for additional costs and fees. These typically add up to 7-10% of the property purchase price. Key fees include:
- Property Transfer Tax (IMT): A progressive tax based on the property’s value and use (primary vs. secondary home).
- Stamp Duty (Imposto do Selo): A flat 0.8% tax on the property purchase price, and a separate stamp duty of 0.6% on the mortgage amount.
- Notary and Registration Fees: Legal fees for the final deed and property registration, usually a few hundred euros.
- Bank Fees: These can include valuation fees, application fees, and a legal fee to draft the mortgage contract.
FAQ
Q: Can a foreigner get a mortgage in Portugal? A: Yes, foreigners can get a mortgage in Portugal, whether they are from the EU or a non-EU country. The process is similar to that for residents, but with some key differences in terms and requirements.
Q: What is the typical loan-to-value (LTV) ratio for foreigners? A: For non-residents, the LTV ratio is typically 60% to 80% of the property’s value. This means you will need a down payment of at least 20% to 40% of the purchase price. The exact percentage depends on the bank’s assessment of your financial profile and the property.
Q: What documents are required to apply? A: You will need a Portuguese Tax Identification Number (NIF) and a Portuguese bank account. Other key documents include:
- A valid passport or ID.
- Proof of income (e.g., last 3-6 months’ payslips or tax returns for self-employed).
- Recent bank statements.
- A credit report from your home country.
- A letter from your employer or accountant.
Q: Do I need a Portuguese bank account? A: Yes, opening a Portuguese bank account is a requirement. The bank will use this account to disburse the mortgage funds and collect your monthly payments.
Q: How long does the mortgage application process take? A: The process can take anywhere from 4 to 12 weeks, depending on how quickly you provide the required documents and the specific bank’s processing times. It is wise to start gathering your documents and getting pre-approved before you find a property.
Q: Are there different types of mortgages available? A: Yes, the two main types are:
- Variable-Rate Mortgages: The interest rate is tied to the Euribor, and your monthly payments can fluctuate.
- Fixed-Rate Mortgages: Your interest rate and monthly payments remain constant for a set period, offering more stability.
Q: What are the main costs besides the down payment? A: Be prepared for additional costs, including:
- Property Transfer Tax (IMT): A progressive tax on the property’s value.
- Stamp Duty (Imposto do Selo): A tax on the property purchase and the mortgage itself.
- Bank Fees: These cover application, valuation, and legal costs.
- Notary and Registration Fees: For finalizing the deed and registering the property.
Financing Golden Visa Investments with a Mortgage
While the Portugal Golden Visa program no longer accepts real estate purchases as a qualifying investment, it’s worth noting that if you’re pursuing a different investment route (e.g., fund subscriptions or capital transfers), a mortgage cannot be used to meet the minimum investment threshold. The full investment amount must be sourced from your own capital and transferred from outside of Portugal. This ensures the integrity of the investment and that the funds are a new injection into the Portuguese economy.