You need to know exactly how much you can afford to spend and how you will finance your property. Many agents recommend you have your finance in place before you go and view properties, so you won’t lose out because the process is not always as quick one.
Getting a Portuguese mortgage
Arranging any mortgage abroad can be a daunting prospect and Portugal is certainly no exception. For the uninitiated, it’s difficult to know where to start and whether information you see or receive is correct. This is complicated by the fact that banks lending in Portugal do not always offer the same conditions to clients, even if they have similar profiles. The mortgage market in Portugal is quite traditional in the sense that having the right contacts is crucial if you want to get the best deals. The process typically takes 6-8 weeks.
Basic Mortgage Facts
- Max 80% loan to value
- Max term 40 years
- €60,000 minimum loan
- Rates from 0.873%
Should I raise finance from my UK property or take out a Portuguese mortgage?
If you have sufficient equity in your UK property, you can choose to take out an additional or new mortgage to buy your overseas property. Bear in mind, even though there is no Portuguese lender in place to insist on certain processes, you should still seek legal advice and ensure independent checks are carried out on the property.
One advantage of a Portuguese mortgage is that the lender will carry out its own checks on the property and arrange a valuation. Portuguese mortgage rates are particularly attractive (see example terms above) and present buyers with a good option to raise finance locally.
Rates now start at 0.873% for a variable rate of up to 80% loan-to-value (based on the purchase price) and 1.2% for a fixed rate of up to 80% loan-to-value.
Interest-only deals are rare so most mortgages are on a repayment basis with the maximum term 40 years. If you are 80 years or older, it is advisable to speak to a mortgage specialist as they are ways for you to obtain a mortgage. It is worth remembering that monthly mortgage payments will be in Euros and the Sterling rate will vary so it is a good idea to have a currency strategy in place to mitigate any fluctuation if you are paying your monthly mortgage payments from the UK.
Portuguese banks, mortgage brokers & British buyers
Mortgage rates from Portuguese banks are very low and lending conditions continue to improve. There is strong interest from Portuguese lenders to assist foreigners in buying property. You can approach the different banks directly in Portugal but keep in mind that each one has different criteria and you may not necessarily find the best deals available. The language barrier may also prove difficult. Another option is to use a registered mortgage broker who understands the market and has relationships in place with the different lenders and can find the best product to suit your requirement.
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