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 non-Portuguese get mortgages here every year, both as residents (expats who live here) and non-residents (people who live somewhere else). Although there are a few differences, the process for applying for a mortgage is similar to anywhere else.
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So, how do you get a mortgage in Portugal? This article will break it down for you.
The mortgage process
The first step in getting a mortgage is determining how much you can afford, which you can do by speaking to a mortgage broker or directly to a bank.
Now that you have a budget, begin looking for properties within that budget.
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.
Deciding whether to use a broker
Most banks in Portugal offer mortgages, and you could just visit any bank (or all of them) to see whether they’d be willing to give you a mortgage and what sort of rates you would expect to pay.
Alternatively, you could use a mortgage broker such as Mortgage Direct (link to get an estimate of how much you can afford) who will compare multiple mortgage options for you.
For international buyers or new residents, a broker can be the easier option for a number of reasons.
- Mortgage brokers are used to dealing with international clients and will not only speak English, but many even specialise in mortgages for expats or non-residents. They’ll be used to explaining things, and can easily compare Portuguese mortgages to what exists in other countries like the UK, US, or Germany.
- A broker will have a good idea of which banks are most likely to accept your application, which is particularly useful if you’re a non-resident, older applicant, self-employed, or anything else that adds small complications.
- When using a broker, you only have to submit one application rather than having to make individual applications at each bank.
Brokers typically earn a commission from the bank, so there’s usually no cost to using their services. The only exception to this is if they do extra work such as help you find a property.
Of course, there’s no obligation to use a broker. However, it can be worth speaking to one to get a better overview of how mortgages work in Portugal.
Comparison websites aren’t as common in Portugal as they are in countries like the UK, but there is ComparaJá.pt. Unfortunately, this is currently only available in Portuguese but it can be useful for getting an idea of rates.
Working out how much you can afford
Can you afford that villa by the sea in the Algarve or that cute little apartment in Porto? That depends on a couple of factors, such as the size of your deposit and your monthly net income.
The easiest starting point is your deposit, as this will determine the maximum amount the bank will offer. Next, you’ll need to determine how much you can afford to pay per month.
How big a deposit (down payment) do I need?
While 10% mortgages do exist in Portugal, they’re less common here, especially for non-residents or those who have recently moved here and don’t have a credit history in Portugal. Even Portuguese struggle to get them.
- Residents should expect to have to put down a 20-30% deposit (70-80% loan-to-value)
- Non-residents should expect to have to put down a 30% deposit or more (70% loan-to-value)
Obviously, putting down a bigger down payment than required will lead to a higher likelihood of being accepted and lower interest rates as well.
Keep in mind that, as well as the cost of the property, you’ll also need to pay anywhere from around 6-10% extra for other buying costs such as stamp duty, the mortgage application fee, and lawyer costs. These costs cannot be funded by the mortgage.
It helps to play it safe and estimate 10%. This means that as a resident you should have 30% of the purchase price in cash and 40% as a non-resident. The rest you should aim to get as a mortgage.
Note: Due to strict money-laundering rules in Portugal, you may be asked to prove where your deposit came from (e.g. savings, a gift from family, sale of a previous house, etc.). It’s not a big deal, but it does surprise first-time buyers in Portugal.
How much can I afford to spend on this mortgage per month?
When deciding how much you can afford to spend on a mortgage per month, the bank and mortgage broker will look at your net income (income after tax) and your monthly outgoings.
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? Well, this mortgage for starters, but also credit card or loan repayments, any other mortgages or rent commitments. It doesn’t include things like food and drink, although your spending will likely be analysed.
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%.
Note: Buy-to-let mortgages don’t really exist in Portugal and, if you’re buying the property as a rental, future rental income isn’t normally considered as income for the purposes of a mortgage.
What are typical mortgage rates?
The mortgage rate you’re offered will be based on a number of factors such as 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.
Rates are normally based on the Euribor interest rate, which the bank adds a small percentage to and, at the moment, are typically between 1.5 and 3%.
Banks in Portugal offer both fixed-rate and variable mortgages. It’s possible to set the mortgage as fixed for a period of time and variable for the remainder. The longer you fix it, the higher the rate will likely be as the bank is taking on more unforeseen risk.
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 50 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).
Frequently Asked Questions
Can I get a mortgage for a Golden Visa Property?
Not really. If the property needs to cost €500,000 to meet the Golden Visa requirements (there are exceptions where it’s less), you must pay the €500k in cash. If the property costs €600k, you can get a mortgage for the remaining €100k.
Can I get a UK mortgage for a property in Portugal?
Most banks, including those in the UK, don’t like to give mortgages for properties abroad. Most brokers in the UK will also refer you to a broker in Portugal or an international specialist, many of which come from the UK anyway.
How do I get a NIF?
Getting a NIF is fairly straightforward. If you’re from an EU country, you can do it yourself by visiting Finanças or pay a lawyer to do it for you. Those from outside the EU will need to pay a lawyer. Lawyers typically charge around €50-200 on average.
Will I need to get life insurance?
Life insurance is not mandatory for getting a mortgage in Portugal, but many banks ask for it, especially for older applicants or those with certain medical conditions. Most Portuguese banks offer insurance products, so you’ll probably be able to get it through the bank. Alternatively, you can speak to an insurance broker instead who will be able to compare more options for you.
Is it hard to get a mortgage if you’re self-employed?
Self-employment is always seen as more of a risk for banks, both in Portugal and anywhere else, but that just means the bank will be more thorough. For example, the bank may ask for your tax returns to be examined and certified by an accountant.
What if I change my mind?
There’s a seven-day cooling off period after agreeing to a mortgage.
What’s the minimum age that I can get a mortgage?
The minimum age is 18.
What is the maximum length of time that I can take a mortgage out for?
Typically 40 years, but it will depend on your age. If you’re 60, for example, you won’t be able to take out a 40-year mortgage.
Is it harder for foreigners to get mortgages in Portugal?
Foreigners often (not always) have the advantage of having a larger deposit and a larger monthly income than the average Portuguese person. The challenge for banks lending to foreigners is that, even if they’re resident in Portugal, they don’t always have a lengthy credit history here. Many are also self-employed or have multiple forms of income, which makes it harder for banks to easily assess whether they can give you a mortgage or not. So, some things are harder and some things are easier.
How much money do I need to spend in order to get residency?
Residency is not based on buying a house here. There is the Golden Visa scheme, where you spend between €280k and 500k on a property, but simply buying the property isn’t enough – you need to apply for the visa as well (and renew it every few years).
Can I repay my mortgage early?
Yes, although there’s normally a small early repayment charge or early redemption penalty, which is set by the Bank of Portugal. For fixed-rate mortgages this is 2% and for variable-rate mortgages this is 0.5%.
Can crypto be counted as income?
Although Portugal is often marketed as a crypto-friendly tax-haven, the reality is much different. Banks are very traditional and will probably be nervous about accepting cryptocurrency as income due to its volatility. It’ll be easier if you transfer it to Euros or another FIAT currency.