Getting a mortgage in Portugal
Basic Mortgage Facts
Max 80% loan to value
Max term 30 years
€100,000 minimum loan
Rates from 3.3%
The financial crisis of 2007 left the Portuguese economy reeling and property prices collapsed by more than 30 per cent. Fast forward to 2016, however, and the outlook is much more positive, with experts forecasting 2 per cent gains for the average property over the next year. According to the RICS/Ci Portuguese Housing Market Survey, steady demand is continuing to boost sales volumes, although the outlook for prices varies in different parts of the country, with some sellers holding out for higher prices.
Prices, however, are still generally below pre-recession levels, so investors, feeling more confident about the future and buoyed by the growing strength of the pound, are coming back to the market.
Should I raise the finance from my UK property or by taking out a Portuguese mortgage?
If you have sufficient equity in your UK property, you can certainly choose to take out an additional or new mortgage to buy your overseas property. But you should still seek legal advice and ensure that independent checks are carried out on the property. Taking out a Portuguese mortgage is becoming increasingly popular, however, especially as the market has become more developed and competitive. It also means that the lender will carry out its own legal checks on the property and arrange for a valuation to take place.
Is it still possible to obtain finance?
Lending conditions continue to improve, and the reduced cost of funding together with continued interest from Portuguese lenders to assist foreigners to buy property means that many deals are becoming cheaper. Rates now start at 3.3 per cent for a variable rate of up to 30 per cent loan to value, 3.4 per cent for a variable rate of up to 60 per cent loan to value, and 4.1 per cent for a five-year fixed rate of up to 80 per cent loan to value. Interest-only deals are rare, so most mortgages are on a repayment basis, and the maximum term of any mortgage is 35 years, but this varies depending on the type of loan.
Should I go directly to a bank to get the mortgage?
Options for borrowing from a UK-based bank are limited. You can go directly to lenders in Portugal, but each one has different criteria and you may not necessarily be offered the most suitable loan, or the best deal available. You may also encounter difficulties with language barriers. A specialist broker will know the exact mortgage application requirements and can source the best possible deal. They’ll also know of any restrictions and administration requirements, which will save you a lot of time, cost and hassle.
At what stage should I apply for a mortgage - before or after I've found the property I want?
It’s sensible to get the mortgage process started as early as possible, even if you’ve not begun to look at properties. In particular, you need to establish how much you can afford. An 'Approval in Principle' will tell you exactly how much you can borrow and what price range you can realistically consider when conducting your property search. It will also prove that you’re a serious buyer, could make you better placed to negotiate price with the vendor. Even better, it costs nothing.