You’ve found that perfect property in Portugal. It could be an apartment in Lisbon, a villa in the Algarve, a ruin on the Silver Coast, or a cottage on a remote island of the Azores. Either way, it’s perfect. Now you just need to get a mortgage (called a hipoteca or crédito habitação in Portuguese).
Even if you live abroad, you’ll probably need to get this through a Portuguese bank. That may seem daunting, but it shouldn’t be. Thousands of foreigners get mortgages here every year, both as residents (expats who live here) and non-residents (people who live somewhere outside of Portugal). Although there are a few differences, the process for applying for a mortgage is similar to anywhere else.
So, how do you get a mortgage in Portugal? This article will break it down for you, but in the meantime you can fill out the form below to speak to a mortgage broker and see what options are available to you.
Can Foreigners Get a Mortgage in Portugal?
According to Camille Ramiere who runs buyers agency Bloom Spaces, “yes, you can buy property in Portugal as a foreigner.” In fact, foreigners make up a large proportion of mortgage clients for Portuguese banks. According to Dinheiro Vivo https://www.dinheirovivo.pt/economia/nacional/bancos-destinam-10-do-novo-credito-a-habitacao-para-estrangeiros–15510754.html, in the first half of 2022, around 10% of mortgages in Portugal were granted to foreigners.
However, even though banks don’t differentiate between Portuguese and foreigners, there are different requirements for people who live in Portugal (residents) and people who live outside of Portugal (non-residents). These requirements are discussed in the section below.
How Big A Mortgage Can I Get?
In Portugal, you typically need a deposit of at least 20-30%. The exact minimum amount varies depending on whether you’re a resident (you legally live in Portugal) or you’re a non-resident (you legally live somewhere else).
The following is a basic guideline:
- Residents: Normally need to put down at least 20%.
- Non-Residents: Normally need to put down at least 30%.
That means that if you have a €50,000 deposit, you might be able to get a mortgage of:
- Up to €250,000 as a resident
- Up to €166,666.67 as a non-resident.
The exact amount you’ll be able to borrow varies depending on your monthly income and outgoings, but this is a good starting point. Another factor to consider is buying costs, such as lawyer fees or property transfer taxes, something our Portugal mortgage calculator can provide a rough estimate of.
How much can I actually afford?
It isn’t quite a simple as saying you can get a 80% LTV or 70% LTV mortgage. The bank will also need to look at how much you can afford to pay per month.
As a general rule, your fixed outgoings cannot be greater than around 35% of your net income. This means that if you earn €1,000 per month, your fixed outgoings, including this mortgage, cannot be greater than €350 per month.
What are fixed outgoings? Examples include:
- The mortgage you’re applying for
- Other mortgages
- Credit card or loan repayments
- Other rent commitments
If your income or savings are primarily in another currency (e.g. dollars) you should also think about the possibility of currency fluctuations. Your currency could drop overnight – as many British expats found out after the Brexit referendum result – raising the monthly cost of your mortgage repayments, so it’s always good to allow wiggle room of at least 10%.
Another consideration is rental income, if you’re thinking about buying a holiday home or property to Airbnb. Portugal doesn’t have buy-to-let mortgages, which means that you usually can’t get a mortgage based on projected rental income: it needs to be based on current income.
What are typical mortgage rates?
Mortgage rates are complicated to estimate as the bank will need to know factors like the size of your deposit, loan size, and the length of the mortgage. A bank will run all of these factors through a simulator to see what rates they can offer and a mortgage broker will do the same, but will return results from multiple banks. However, even though calculating mortgage rates is difficult without having all of this information, it is possible to discuss how mortgage interest rates work.
In Portugal, rates are normally based on the Euribor interest rate, which is the rate at which European banks can borrow money. A bank borrows money at this rate and then adds a small percentage to that amount (often called a “spread”). For example, if the Euribor rate is 3% and the bank adds an additional 1% to that amount, your mortgage interest rate will be 4%.
Banks in Portugal offer fixed-rate, variable, and mixed mortgages. If your mortgage is variable (or mixed and no longer in the fixed period) then the bank will look at the 3, 6, or 12-month Euribor rate, add its own spread, and calculate your mortgage interest rate based on this. Naturally, the Euribor rate goes up and down which means that your interest rate can fluctuate.
How long do mortgages last?
A typical mortgage will normally last for around 25 years, but you can get mortgages that last longer (depending on your age). Non-residents can typically get mortgages that last for 30 years while residents can get mortgages that last for up to 40 years.
As mentioned, it does depend on your age. Some banks offer mortgages that go up to 75 years of age, but normally they last until around 65.
Although longer-term mortgages mean paying more interest to the bank, increasing the length of the mortgage usually lowers the monthly repayment cost, making it more manageable on a month-by-month basis.
Typical documents required
To apply for a mortgage, you’ll normally need the following documents:
- Passport or ID
- NIF (número de identificação fiscal)
- Proof of address (e.g. a utility bill)
- 3-6 months of bank statements
- Income details
- Employees: 6 months of payslips and perhaps employment contract
- Self-employed: Tax returns (which often need to be confirmed by an accountant)
- Retirees: Pension slips and details
- Landlords: Tenancy agreement
- Credit report – Non-residents are sometimes asked to get a credit report, such as one from Experian, from their home country.
- Life insurance (A common requirement for mortgages in Portugal, and something the bank giving you the mortgage will probably be able to offer).
The mortgage process
While everybody’s experience will be different, the typical mortgage approval process in Portugal looks a little like this.
- Determine how much you can afford, which you can do by speaking to a bank or mortgage broker. Some brokers and banks will offer you pre-approval or a mortgage-in-principle, so that you can know how much you can afford.
- Begin looking for properties within that budget.
- Find a property that you like.
- Once you find a property you like, make an offer and sign the CPCV (contrato de promesa compra e venda) or Promissory Contract, which is where you put down a deposit (usually 10-20%). Your lawyer can put a term in the Promissory Contract and also the Reserva (if asked to pay this) that states that your offer is dependent on the bank approving your mortgage.
- You’ll now need to go through the full mortgage application process with the bank. To do this, you’ll need to open a bank account with them and fund it with enough money to cover the mortgage application costs. You’ll normally need a NIF (número de identificação fiscal) in order to open a bank account, but this is easy to obtain.
- The bank will then visit the property and (hopefully) confirm they’ll give you the amount you need.
- Sign the Escritura or deeds and get the keys to your new property.
As part of your mortgage agreement, it’s likely that you’ll need to take out a home insurance policy as well. You may also want to consider contents insurance and liability insurance.
I have heard there is a minimum lending amount (60000 euros) and also a minimum salary amount (30000 euros per year) for you to be considered as a foreign borrower. Is this true?
Is it normal to have to get life insurance when getting a mortgage in Portugal?
Is it possible to get a mortgage in Portugal if my wages come from a company outside of Portugal?
We were able to get LTV of around 75% but we had to shop around. Most places were only going to give us 70% aka 30% down payment. So basically you will need either 25 or 30% down.
Unfortunately finding a 5 or 10% mortgage was impossible. You will need to have some cash. It's not an ideal place for broke people trying to get on the property ladder.
Initially the system was confusing but we worked it out quickly. There are other factors to consider like the buying costs, but this is a good rule of thumb to start with.