Financing Your Property Purchase: Options and Advice for Buyers

Portugal is home to 10 million people, 78% of whom have bought their own houses. This raises just one question-

Is buying a property in Portugal easy? Well, it’s straightforward. Portugal offers a straightforward financing process for both residents and nonresidents to buy properties in the country.

Even if you are a foreign national, you can buy a house of your own in Portugal. In this blog, we will discuss all about property financing in Portugal.

Mortgages- The Best Way to Finance a Property in Portugal

The simplest way for anyone (resident or nonresident) to finance a property in Portugal is to get a mortgage from the local Portuguese bank. Bank loans are the best way to finance property because they-

Provide larger capital, around 90% loan-to-value to EU residents and 70-80% to foreign nationals.

  • Have moderate interest rates
  • Long repayment time-period( 30-40 years)
  • Easy legal proceedings
  • Well-versed in dealing with foreign investors

About 38% of residents have bank mortgages, and foreign nationals have spent more than twice the amount that Portuguese have spent on buying properties. 

Types of Mortgages

Depending on your preference, property financing in Portugal can be done through-

1. Fixed Rate Mortgage

When you opt for a fixed-rate mortgage, you pay a fixed amount of repayment to the bank every month. The rate of interest doesn’t fluctuate with the market, and hence the debtor pays the same amount for either the entire loan term or the initial set of years. Note that a fixed rate can be expensive as it won’t change even when the market rates fall.

2. Variable Rate Mortgage

The rate of interest fluctuates with the Euribor(euro interbank offered rate). You do not pay a fixed amount throughout the loan term. As the Euribor rate changes, so does the interest, and hence, you are sometimes charged a low rate and at other times, a high one.

3. Mixed Rate Mortgage

In a Mixed-rate mortgage, you pay a fixed amount every month in the early years, and then the rates fluctuate according to Euribor for the rest. Initial payments are comparatively low.

How to Finance a Home Purchase: Home Loan Application Process in Portugal

It is always advisable to contact a buyer’s agent or a trusted real estate agency to get your mortgage application done easily. The following steps apply to both Portuguese and foreign nationals-

1. Submit  a proposal and obtain pre-approval 

This includes providing the bank with important information like the amount you wish to borrow, your income, and the property you want to buy.

2. Prepare and submit the documents to the bank. Once the bank approves your proposal, submit-

  • ID proof/Passport
  • Income proof
  • Portuguese Tax Number (NIF)
  • Bank statements from the last three months
  • Details/ documents of the property you wish to buy(registry, license, etc.)

3. Property Assessment

The bank will assess the property to ensure that it is worthy of the said amount.

This may take a few days or a week.

4. Mortgage Offer and Signing 

Once the bank evaluates the property, it will approve the loan, and you will sign the loan contract.

The application process is pretty much the same for foreign nationals as it is for residents, except for a few conditions, i.e, comparatively high downpayment(30%), a little less Loan to value, plus a few more documents.

Are you a First-time Homebuyer?

If you are going to buy a property in Portugal for the first time, there’s some good news. 

In 2024, Portugal announced 100% financing for first-time home buyers under 35 years of age. This initiative aimed to encourage more young people to become homeowners. 

Moreover, they are also exempt from paying IMT(municipal property transfer) tax. 

To be eligible to claim 100% financing, individuals need to have Portuguese tax residency and no other property ownership. Foreign nationals are also welcome.

Conclusion

The mortgage rates are adjusted with Euribor. Euribor refers to the interest rate European banks charge each other to lend money. Current Euribor stands at 2.063% for one month.