Dreaming of owning a slice of the Portuguese real estate market but wondering how to navigate the mortgage maze? You’re in the right place! Whether you’re eyeing a cozy apartment in Lisbon’s historic center or a sun-drenched villa in the Algarve, getting a mortgage in Portugal doesn’t have to be a headache.
Since 2016, Portugalist has been the trusted sherpa for countless adventurers on their journey to Portuguese homeownership. We’ve helped a small army of expats secure properties and mortgage loans in Portugal, turning “maybe someday” into “honey, we’re home!”
Ready to turn your Portuguese property dreams into reality? Fill out our quick form below, and let’s chat about making your Portuguese home dreams come true!
Can Foreigners Get a Mortgage in Portugal?
Thinking of buying a little piece of Portugal but worried your foreign passport might be a dealbreaker?
Well, there’s no need to worry: you don’t need to be a Portuguese citizen. In fact, you don’t even need to be living in Portugal (although living here will make the whole process easier).
Not only can foreigners buy property in Portugal, but foreigners make up a huge portion of property buyers in Portugal. In the first half of 2022, about 10% of mortgages in Portugal went to non-Portuguese buyers. That’s a lot of people living the Portuguese dream!
What about overseas mortgages? Your bank may be willing to offer you a mortgage on a property in Portugal, however, most banks won’t offer mortgages on properties abroad. If you want to get a home loan for a property in Portugal, you’ll typically need to get a mortgage from a Portuguese bank.
But Wait, There’s a Plot Twist!
While Portuguese banks don’t play favorites between locals and foreigners, they do care where you’re resident (i.e. legally living the majority of the time). So, it doesn’t matter whether you’re British, American, Portuguese, or Chinese.
To get a mortgage in Portugal, you’ll need a downpayment of between 20% and 30%. The exact amount will depend on whether you’re a resident or a non-resident.
Let’s talk loan to value ratios (don’t worry – we’ll explain what that means!)
- If you’re a resident (aka you’ve made Portugal your home sweet home), you’ll need to put down around 20% to qualify for a mortgage (10% or less down payment mortgages do exist but are rare).
- If you’re a non-resident (you’re buying from abroad), you’ll need to put down around 30% to qualify for a mortgage.
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 mortgage calculator can provide a rough estimate of.
Basically, residents (people living in Portugal) can borrow more than non-residents (people living elsewhere).
Buying for residency purchases
You won’t get residency in Portugal simply for purchasing a property here. However, having a property in Portugal can help you obtain residency. If you’re applying for citizenship, it can also show a “tie to Portugal” which will bolster your citizenship application.
If you’re moving to Portugal on a residency visa like the D7 or Digital Nomad Visa, you may be considering purchasing a property in order to meet the “address in Portugal” requirements.
- The upside is that you’ll have a residential address in Portugal, and you won’t need to spend money renting a property — both to meet the residency visa requirements and to have an initial home while you look for somewhere to buy.
- The downside is that as a non-resident, you will need a larger downpayment and won’t be able to borrow as much.
How much can I actually afford?
Think getting a mortgage in Portugal is as simple as picking a percentage out of a hat? The bank or mortgage providers will also need to look at how much you can afford to pay per month. Not quite! Let’s dive into the finances a little further.
The Magic Number: 35%
Here’s the deal: as a general rule, your fixed outgoings cannot be greater than around 35% of your net income. This is known as the debt to income ratio.
In other words:
- 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 (if you own a property elsewhere)
- Credit card or loan repayments
- Other rent commitments
35% is a rough number. Sometimes it’s 30%, sometimes it’s 40%, but 35% is a good starting place.
Currency Considerations
If your income is in a different currency (hello, dollar dancers!), watch out for those tricky currency fluctuations. Remember the Brexit tango that caught many British expats off-guard? Ouch! In previous years, the dollar has been up and it’s been down. Neither you or I are smart enough to predict where it’ll end up.
Pro Tip: Always leave some wiggle room – at least 10% – in case your currency decides to do an unexpected samba overnight.
The Rental Income Rumba
Dreaming of a holiday home or an empire of Airbnb rental properties? Hold your horses! Portugal doesn’t do buy-to-let (or buy-to-rent) mortgages.
This means:
- You can’t base your mortgage loan application on projected rental income (no matter how optimistic your spreadsheet looks).
- It’s all about your current income.
In practice, this means if you earn €1,000 per month, the maximum outgoings (including the mortgage you’re applying for) can’t exceed the 35% rule of €350 per month — even if your Airbnb is going to be the hottest place in Lisbon.
On the plus side, this does mean that you can rent out your property without getting a specialist mortgage for landlords. However, be aware that you will need an appropriate licence for short-term rentals (called an Alojamento Local or AL licence).
Typical documents required
Ready to apply for your Portuguese mortgage? Time to channel your inner bureaucrat and gather those all-important documents! Here’s what you’ll need to bring to the party:
Main requirements
- Passport or ID (Because they need to know you’re you!)
- NIF (número de identificação fiscal) (Your 9-digit Portuguese tax ID – if you don’t have one, we can help)
- Proof of address (A utility bill will do as will recent bank statements)
Your Financial Footprint
- Bank Statements: 3-6 months of bank statements are typically required (the bank want to assess your spending habits to see if you can afford this mortgage loan).
- Income details (This varies depending on your financial superhero identity):
- Employees: 6 months of payslips and maybe your employment contract or an employer’s reference letter. You may also be asked for your previous year’s tax returns.
- Self-employed: Tax returns (often needing an accountant’s stamp of approval – no, your dog can’t sign off on these). Business bank statements for the previous 3 months (or more). You may also be asked for the previous 3 year’s profit and loss statements.
- Retirees: Pension slips and details (proof that relaxation is your full-time job now). Any relevant savings or investment certificates.
- Landlords: Tenancy agreement (show off your property mogul status). You may also need to provide bank statements showing the previous 3 month’s of rental income.
The Extras
- Credit report: Non-residents might need to fetch one from their home country (Experian is a popular choice)
- Life insurance: Often required for mortgages in Portugal (Don’t worry, the bank offering the mortgage can usually hook you up with this)
Remember, getting all these documents together might feel like herding cats, but it’s a crucial step in your Portuguese property adventure. Need a hand navigating this paper maze? That’s what we’re here for! Let’s turn that document pile into your ticket to Portuguese homeownership!
How long do mortgages last?
Curious about how long you’ll be partnered with your Portuguese mortgage? Let’s break it down!
The Standard Timeline: 25 Years
Typically, you’ll be committed to your mortgage for about 25 years. But don’t worry, there’s room for flexibility!
Resident vs. Non-Resident Options
- Non-residents: You can stretch your mortgage term up to 30 years. Not bad for a long-distance relationship with Portugal!
- Residents: Lucky you! Your mortgage can last up to 40 years. That’s plenty of time to really settle into your Portuguese lifestyle.
Shorter mortgage terms mean you’ll pay your property off quicker. Longer mortgage terms mean your monthly payments will be lower (but you’ll pay a lot more in interest over the mortgage term).
Should I get a fixed rate mortgage or a variable rate mortgage?
The most common types of mortgages in Portugal are capital repayment mortgages. Interest-only mortgages are not very common.
The next consideration is whether to get a fixed-rate mortgage or a variable-rate mortgage. Very simply, a fixed rate mortgage has a fixed interest rate (and subsequently a fixed monthly repayment amount) whereas a variable rate mortgage has an interest rate that varies based on the Euribor rate.
In Portugal, it’s common to fix a mortgage for the entire term or for a period e.g. 5 or 10 years and then have a variable rate mortgage for the remainder of the term. Frequent refinancing (e.g. when the fixed rate term ends) isn’t as common in Portugal as it is in other countries, like the UK.
The Age Factor
Remember, your age plays a big role in determining your mortgage term:
- Some banks are willing to extend mortgages until you’re 75. That’s a lot of time to enjoy your Portuguese property and means you can use pension income to cover your monthly payments.
- But typically, they prefer to wrap things up around age 65.
Longer Term: Pros and Cons
Opting for a longer-term home loan? Here’s what you need to know:
- Pro: Lower monthly mortgage payments, making it easier to manage your budget.
- Con: You’ll end up paying more interest over the life of the loan.
What if you want to repay your home loan early? That’s an option too! Mortgages can be repaid early at any time during the mortgage term.
However, there will be a small early repayment penalty (as per Bank of Portugal rules). For a variable rate mortgage, this will be 0.50%. For a fixed rate mortgage, this will be 2%.
Costs to Consider
So, you’ve got your eye on that dream Portuguese property. But hold onto your wallet! While the property itself is the main star of this financial show, there are some supporting actors you should know about. Let’s break down the potential costs of getting a mortgage in Portugal.
Remember, these are estimations – think of them as financial weather forecasts rather than set-in-stone facts.
The Usual Suspects
| Cost | Estimated Amount | What’s It For? |
|---|---|---|
| Mortgage Application Fee | ~€300 | Your ticket to the mortgage party |
| Bank Valuation Fee | €150-300 | The bank’s way of making sure your dream home is worth the investment |
| Stamp Duty | 0.60% of mortgage amount | The government’s slice of the pie, taken from your account after mortgage completion |
The ‘It Depends’ Brigade
- Mortgage Broker Fees: Some work for free (well, the bank pays them), others charge a fee. Paying might get you more impartial advice or help with tricky mortgages like construction mortgages or commercial mortgages.
- Bank Account Opening:
- In Portugal: Free (except for travel costs if you’re not there)
- Remote opening: €250-500 if using a lawyer or third-party service
- Bank Fees: As varied as Portuguese wine! Details will be in your mortgage proposal.
The Potential Extras
- Non-refundable application/’commitment’ fee: Around €500. Think of it as your “I’m serious about this” badge.
- Lender’s valuation survey: €500-800. The bank’s way of double-checking that your dream home is as dreamy as you think.
Remember, while these costs might seem like pesky mosquitoes compared to the property price elephant, they can add up. It’s always better to be prepared than surprised when it comes to your finances!
The mortgage process
Ready to embark on your Portuguese property adventure? While everyone’s journey is unique, here’s a typical roadmap to help you navigate the mortgage application process in Portugal.
1. Know Your Budget
First things first: figure out how much you can afford and the maximum loan you’re likely to be offered. How do you do this? Chat with your bank or an independent mortgage broker. Some might even offer you a mortgage-in-principle, giving you a clear idea of your budget.
Which is better? We recommend speaking to a mortgage broker who covers the whole of the market rather than a bank that will only tell you about their home loan products and rates.
Want a specialist mortgage?
- Mortgages for Construction: you can take out a mortgage for around 50%-60% of the total cost of land and construction.
- Mortgages for Business: you can take out a mortgage for around 50% of the purchase price or the bank’s valuation if the valuation is lower.
If you’re looking for a specialist mortgage, it’s also best to speak to a mortgage broker who can compare all the different options on the market.
2. Window Shopping
Now the fun begins! Start browsing properties within your budget. Time to daydream about those ocean views or cozy city apartments!
We recommend working with a buyer’s agent? Why? While it isn’t essential, working with a buyer’s agent adds a little extra protection when navigating the Portuguese property market.
For example, it’s hard to work out whether a property purchase price is fair assessment of the property value. This is because you can’t access a directory of recently sold properties in Portugal – only estate agents have that information. By working with a buyer’s agent (or a realtor who’s working on your behalf) you’ll get an idea of whether asking prices are reasonable. This is important as the bank is likely to come in with their own property valuation.
3. Find “The One”
Spot a property that makes your heart skip a beat? That’s your cue for the next step.
4. Make It Official
- Make an offer and sign the CPCV (contrato de promesa compra e venda) or Promissory Contract.
- Put down a deposit (usually 10-20% is the minimum deposit).
- Pro tip: Your lawyer can add a clause stating your offer depends on bank approval. It’s like a safety net for your deposit!
5. Paperwork Party
Time to dive into the full mortgage application:
- Open a Portuguese bank account with your chosen lender.
- Fund it to cover application costs.
- You’ll need a NIF (número de identificação fiscal) to open the account. Don’t worry, we can help you get one of these.
6. Property Inspection
The bank will visit the property and will do their own property valuation. Fingers crossed, they’ll confirm they’ll lend you the amount you need.
7. Seal the Deal
Sign the Escritura (property deeds) and get the keys to your new Portuguese paradise!
Bonus Round: Insurance
As part of your mortgage agreement, you’ll likely need:
- Building insurance (most mortgage applications will require you to take our buildings insurance that at least covers damage against fire and floods)
- Contents insurance (recommended, but not essential)
- Liability insurance (public liability insurance is worth considering if you’re thinking of renting your property out)
Remember, while this process might seem like a complex dance, you don’t have to lead alone. Need a partner to guide you through these steps? That’s what we’re here for! Let’s turn your Portuguese mortgage dreams into reality, one step at a time.
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