How to obtain a mortgage in Portugal?

Portugal is a popular destination for many Dutch and Belgians, whether for annual holidays, a second home or to enjoy their retirement. In case you want to buy a (second) home or emigrate, this often involves a mortgage. But how do you arrange a mortgage in Portugal to buy a property there? Pedro tells you more about how this works!

Can Dutch and Belgians get a mortgage in Portugal?

Yes, you can, even if you don't live in Portugal or have Portuguese nationality. Its beautiful nature, long and habitable coastline and affordable house prices make it an attractive option for many, whether as a holiday home for the family or as an investment to rent out.

In addition, banks in Portugal are happy to deal with foreigners, who are a relatively stable and buying group for them for mortgage loans.

Advantages of a Portuguese mortgage

Portugal is known for its hospitality to visitors and investors. You can easily find opportunities to get a mortgage from local banks with the help of an independent mortgage broker.

Next to a cashbuy, a mortgage is the most common way to finance your home purchase in Portugal. Some of the advantages are:

• Increasing interest from Portuguese mortgage lenders to help foreigners with loans.
• Legal checks by the mortgage lender.
• Low mortgage rates in Portugal.
• Mortgages in Portugal are available to both residents and foreigners.
• Properties bought in Portugal on credit may be rented out without restrictions, reducing risks.

Rules, lending criteria and deposit requirements

Portugal has an excellent record of providing mortgages to non-residents (non-resident or non-habitual resident), and the mortgage application process is relatively straightforward. Even for people living outside the country. However, as with any mortgage, you must meet the lender's criteria. These criteria include your employment status and income, credit history, property type and your personal (financial) circumstances.

Portuguese banks' requirements are less stringent, but there are still tough underwriting criteria you have to meet!

Required own deposit for a Portuguese mortgage

For non-residents, most lenders require at least 20 to 30% down payment. Does this feel like a big step? Don't let this put you off - instead, talk to a specialist mortgage adviser about your situation. For instance, Pedro may be able to help you find a lender willing to stretch the maximum loan-to-value or suggest other ways to raise the required equity.

Tip: Want to use your surplus value for a purchase in Portugal? Then do our Home equity check!

Mortgage term

The average term of a Portuguese mortgage is 25-30 years. If you want to repay your mortgage earlier, you often pay a penalty of 0.5% for a variable rate and 2% for a fixed rate. Of course, you negotiate these terms when you apply for a mortgage. Pedro is happy to help you find someone to represent your interests.

Your credit history

Before applying for a mortgage in Portugal, it is wise to check your credit reports, even if you think there will be no problems. In the Netherlands, this involves the BKR (bkr.nl) and in Belgium the CKP. In any case, it is always good to know what is known about you and to give yourself a chance to correct any inaccuracies. The last thing you want is for your mortgage application to be rejected because of a simple error in the cbr or ckp.

Keep in mind that banks require an official printout, sent by post and stamped. This can often take some time. A screenshot or digital download is not valid!

How much can you borrow for a mortgage in Portugal?

Unlike in the Netherlands or Belgium, where maximum mortgage amounts are determined based on annual incomes, in Portugal this is calculated slightly differently. Portuguese lenders look at monthly affordability, adding up all your income and comparing it with the amounts you owe on existing debts such as rent, mortgages, credit cards and loans.

This ratio is expressed as a percentage called the debt-to-income ratio (DTI). For example, if you have a monthly income of €4,000 and your financial obligations are €1,000, this would be a debt-to-income ratio (DTI) of 25%. Keep in mind that repayments on your upcoming mortgage, along with associated costs such as building insurance, are included in this calculation.

Your maximum Debt-to-Income ratio (free month space)

Most lenders in Portugal want your DTI to be below 35%, sometimes even 30%. The exact figures depend on the lender and your purchase profile. Does the bank see you as a wealthy buyer with a stable income and a lot of (saved) money/assets? Then the limit of your DTI will be higher (35% or even 40% in select cases). You can Watch together with Pedro Whether you might be eligible for this.

Coming back to the example, if you have a DTI of 25% in the Netherlands or Belgium, that leaves you with 10% of slack. This is because the Portuguese bank wants you to spend a maximum of 35% of your income on ALL your fixed borrowing (i.e. both at home and in Portugal). If you go emigrate? Then your charges will expire. Our mortgage advisor will take care of this when you apply.

What documents are required for a mortgage in Portugal?

If you want to apply for a mortgage in Portugal, you need to submit the following documents for an initial assessment. (The documents are not required for our mortgage indication).

• Copy of your passport
• Portuguese tax number (also called NIF number)
• Proof of income
• Bank statements
• A recent utility bill
• Recent mortgage statements
• Proof of any savings or investment income
• Bank reference letters
• Property details - obligation to buy or contract of sale

These documents vary depending on your employment status. You have to declare the time you have been working for the company or self-employed and prove your gross annual income.

If you are employed:

• Last year's income tax return
• Salary income, as shown by pay slips for the past three months
• Reference letter from the employer

If you are self-employed (or have more than 20% share in a PLC):

• Last year's income tax return
• Your company's bank statements for the last three months
• Three years of profit and loss account and balance sheet of your company

Other income types:

• Confirmation of pension income for the last three months
• Copy of rental contract for leased properties
• Last three months' bank statements showing rental income
• Copy of investment certificates

Keep in mind that the bank may request more documents.

How the mortgage process works in Portugal

The application process starts with a proper calculation of whether you are creditworthy. So you can do this together with on (Mortgage in Spain Direct). If this is positive, an initial approach to a Portuguese bank or mortgage advisor follows.

Having an experienced mortgage broker by your side makes the process much easier to get the best deal for your situation. Based on your file, this person can estimate what negotiations are possible; and which banks suit you.

The process further consists of six steps, from getting an offer to signing the deeds of the house and mortgage:

1. Mortgage quote
2. Submit application forms
3. Mortgage offer
4. Valuation report
5. Arrangements for completion
6. Payment (all mortgage-related fees, tax office charges and taxes) and signing (deed of the property and mortgage deed)

Pre-mortgage process (home check)

Before accepting a formal mortgage offer, it is important to ensure that the property you are buying has undergone the proper checks. Consider engaging the services of a property lawyer. Pedro actually always recommends this.

You will need legal help at various points in the process of buying a property in Portugal, so it can be useful to have a trusted lawyer on your team from the start, especially as they can also bridge the Portuguese language barrier if you don't speak the language.

The services a real estate lawyer can offer include:

• Supervising the purchase transaction from start to finish
• Remote handling of bureaucratic procedures
• Checking whether there are debts on the property
• Find out who the legal owner(s) is/are and whether they have the right to sell the property
• Drafting contracts and documents, such as the reservation agreement
• Checking the construction history of the property (valuation)
• Reviewing the sale and purchase agreement and advising on legal implications and obligations

A lawyer has a different function than in the Netherlands. In a Portuguese purchase, it is practically always called in!

Steps to obtain a mortgage in Portugal

If you have decided to buy a property in Portugal, there are some important steps to follow to find and finance your dream home.

Step 1: Make sure you have a NIF number

To carry out financial transactions in Portugal, including buying a house, you need a NIF, which stands for Número de Identificação Fiscal, sometimes also called the contribution number - Número de contribuinte.

This is a nine-digit individual tax identification number and you cannot open a bank account or buy a house without it. You can obtain your NIF in person from a local government agency, known as a Finanças, or through your tax representative or lawyer.

Step 2: Find a mortgage broker specialising in Portuguese mortgages

Obtaining a mortgage in the Netherlands or Belgium can feel complicated enough, but the challenge only increases in another country, with different regulations and a new language. Fortunately, you don't have to tackle this alone. Find via holapedro A mortgage advisor with experience in obtaining mortgages in Portugal for non-residents, and who is familiar with local lenders and their requirements!

If you don't know where to start, Then chat with Pedro and he will help you find the right person.

Step 3: Choose the right broker and legal support

When buying a property and getting a mortgage in Portugal, it is crucial to consider logistics and language barriers.

It is ideal to work with professionals who have an in-depth knowledge of the Portuguese legal system and who also speak English, to translate information accurately for you and ensure that the process is clear and orderly for all parties.

Not all estate agents are equally reliable. This is also because there are hardly any exclusive listings in Portugal. This means that an estate agent competes with other agents for who has sold a property first. Our tip is therefore always never to make hasty decisions, due to the insistence of an estate agent.

Read reviews and check the references of the people you work with. You can also ask our mortgage advisor for recommendations.

Getting started with your mortgage in Portugal!

Through HolaPedro, you do a customised calculation to find out your maximum financing. We test you on all possible variables and you will receive a smart mortgage simulation. This way, you will know your mortgage options in Portugal within 20 minutes!

Start mortgage calculation

Or rather first consult with Pedro?

Can I get a mortgage in Portugal?