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How to get a mortgage in Portugal?

When buying a house in Portugal, it is important to know exactly how you will finance the purchase. Will you be using own funds, do you need to sell a property first or do you want a mortgage to purchase your property in Portugal? Once decided that you want to purchase with a mortgage in Portugal, all kind of questions pop up:


What is the maximum possible mortgage percentage that Portuguese bank give out? 

The percentage of the property that is or can be mortgaged is known as the Loan-to-Value (LTV) rate. Each bank can have a different Loan-to-Value maximum, but in genereal the maximum LTV is 60-70% for non-residents and 80%-90% for Portuguese residents. It depends of course on you own financial profile if the maximum percentage will be given to you. 

The LTV of 60% - 90% is calculated over the property valuation price or the purchase price; whichever is the lowest. 

For first time buyers under the age of 35 new regulations have come into effect in 2024; the governement wants to help young people buy a property in Portugal and therefore they provide the option of a 100% finance and a discount on the property purchase tax and stamp duty tax. If you want to read more about this topic, read the article "How to make use of the discounted rules for first time buyers under age of 35 in Portugal?" 


How much mortgage can I get? 

In terms of what you can borrow, the banks considers your Debt-to-Income ratio (DTI). They will require that approximately one-third of your net monthly income covers your existing debts including any rent you might pay plus the new Portuguese mortgage. Additionally, banks check your income against your family composition; household size and the number of applicants (i.e. single or joint application) are relevant factors for the approval of a loan in Portugal. 


What will my monthly costs be for a mortgage in Portugal?

When having a mortgage in Portugal, each month you will pay an installment + interest. To have an idea what the monthly costs will be for the property and mortgage value that you have in mind, use the mortgage calculator for mortgage in Portugal. 


What other costs must I pay?

Fees and taxes relating to the property purchase and the mortgage set-up are generally 7-12% of the property price, depending on the region of Portugal, the type of property and the property purchase price. 


Will my mortgage request be approved?

It’s advisable to get a mortgage approved before starting the purchase process. It is possible to request a pre-approval; this means that the bank or mortgage advisor will already assess your financial situation and you can get an approval based on your financial situation. The only thing then that later has to happen to get the mortgage approved, is for the bank to assess the property documents and do a property valuation.

If you get this pre-approval in advance, you will know exactly in which price range you can go look for properties and you have a better position in case you want to negotiation the price of the property you want to purchase as you can show the vendor you are serious and can move ahead as soon as the bank has assest property documents and carried out the valuation. 


Can I choose between a fixed and variable interest rate?

Portuguese banks offer a mortgage based on the European base rate, the Euribor, then add their bank spread. The percentage added to the Euribor depends on various factors, mainly the LTV, your income/debt profile and the term of the mortgage. The monthly payments on a variable rate mortgage will go up or down according to movements in the Euribor. Fixed-rate mortgages have the same monthly payment for the agreed fixed term. These usually have a higher spread, depending on market factors and the length of the mortgage, but fixed rates give the certainty that your monthly costs won’t change. Mixed rates are also available where the client pays a fixed rate for, say, 5 years and then a variable rate thereafter. Terms up to 30 or in some cases even up to 40 years are possible.


Do Portuguese banks provide a "Buy-to-Let"mortgage or an "Interest Only"mortgage?

Currently the "Interest Only" type of mortgage or "Buy-to-Let" mortgage that are common in the UK and other countries are not yet offered by the Portuguese banks. If you plan to rent out your new Portuguese property, potential rental income won’t be considered in your DTI calculation. 


How to apply for a mortgage?

While it is possible to walk into a Portuguese bank branch and apply for a mortgage, you are likely to get a better deal by applying via a licenced broker. Individual brokers usually have access to better deals and they can compare the offer of various banks to find the best suited mortgage to match your financial profile. The mortgage broker can also help with presenting the financial documents required and are permitted to keep you updated throughout the purchase process.


Which broker to use?

Divine Home can connect you with an individual mortgage broker that speaks your language. Our recommended mortgage brokers have a wealth of experience in a market where contacts are everything and premium service is key. 
If you want to receive a mortgage broker recommendation, you can send your request via the contact form on our website and we will provide you with the contact details.