Getting a Mortgage in Portugal
Understand how to apply for a mortgage in Portugal, and the types of mortgage available...
For those who have a Portuguese Residency Card (Cartão de Residencia), a Portuguese Tax Code (Numero Fiscal de Contribuinte), a Portuguese bank account (Conta Bancaria em Portugal), proof of regular income and/or a contract (Contrato) with an international or national company in Portugal, and a good credit rating, it is fairly easy to take out a mortgage.
Most banks offer attractive mortgage packages for legal residents and some have tailor-made services aimed at foreigners.
To get a loan from a financial institution in order to buy a property, several types of assessment are necessary:
- Expert assessment to determine the value of the property – undertaken by an independent expert working with the bank
- Age and medical records – so that the bank can determine if it is likely that the loan repayments will be met
- Income records – to determine if the applicant has the economic capacity to meet the repayments in the long run
The expert assessment fees are included in the charges made by the bank for the mortgage application.
What is necessary to apply for a mortgage in Portugal?
- Property blueprints
- Income records
- Life insurance (Segurança da Vida) to cover the terms of the mortgage
- Valid passport and identity card (Passaporte e Carta de Identidade)
- Residency card (Cartão de Residencia)
- Bank statements for several months proving receipt of income
- Medical examination (Atestado Medico) for insurance purposes
Working out the price range
It is important to establish the price range the purchaser can afford and most banks will offer to work out a simulation (Simulação) based on the price range required and average monthly income. The purchaser also needs to make sure they have enough funds to cover the deposit and legal fees.
There are three possibilities when seeking a mortgage:
- Directly from a Portuguese bank - the majority have English-speaking staff and some even have international departments for foreigners. Most of the banks in Portugal have similar lending criteria on the terms of the mortgage, how much they will be prepared to lend, what mortgage products they offer, and their arrangement fees
- Use a mortgage broker - the purchaser pays extra but has the added advantage of being advised how much can be borrowed and the best mortgage products to suit individual circumstances.
- Some estate agents (Agencia de Imobiliario) may offer a mortgage service and offer similar services to mortgage brokers
Life insurance (seguro de vida)
All mortgages in Portugal require life insurance and many lenders will offer packages from their own life insurance company partners. It is also common for the bank/financial institution to require full disability cover.
Types of mortgages
Capital and interest repayment mortgage (variable rate)
A flexible mortgage where the repayments are known and the interest rate applicable is revised on a regular basis. If interest rates fluctuate the repayments stay the same – only the term of the loan is affected. It is possible to make lump sum payments or redeem the mortgage early; early settlement usually attracts a penalty that can be negotiated.
Capital and interest repayment mortgage (fixed rate)
Repayments are fixed for the whole term of the mortgage. The property owner knows exactly what will be paid each month and how many payments will have to be made. Fixed rates are usually higher than variable rates. Financial penalties can be incurred for redeeming the mortgage early or changing to a variable interest rate. It is advisable to check what each bank's financial penalties are.