How To Get A House Mortgage In Portugal
Can an expat get a house mortgage in Portugal? Let’s dive into the details, interest rates, how to qualify and who to contact!
Article by Viv Europe - Official Legal and Relocation Partner to KipperTree.
March 11, 2024
Read the full article here
Portugal has emerged as a top destination for ex-pats seeking diverse landscapes, rich cultural heritage, and favourable living conditions. With increasing popularity and a growing real estate market, expats have found their new home away from home. It makes you think, can expats get a house mortgage in Portugal? And how?
The Portuguese Association of Residential Tourism and Resorts (APR) is optimistic about 2024, citing sustained growth trends. While traditionally attracting investors from European markets like the UK, France, Germany, and the Netherlands, as well as from China and other parts of Asia, Portugal is witnessing a surge of interest from new regions such as Brazil, the United States, Canada, and the Middle East.
However, navigating the Portuguese mortgage system requires insight. In this article, we delve into the essential steps and considerations for obtaining a house mortgage in Portugal. Our aim is to provide invaluable guidance for a smooth transition to homeownership in one of Europe’s most sought-after destinations. Follow along!
Understanding Portugal’s Real Estate Market
In the third quarter of 2023, Portugal’s residential mortgage lending surpassed an impressive 100.6 billion euros. This milestone highlights Portugal’s growing prominence in the European real estate market.
A report by Forbes further highlights Portugal’s appeal, revealing that its property market remains notably more affordable than that of the United States. With a median listing price per square foot of $154 in Portugal, it is 30% less expensive than the $221 observed in the US. This explains why hundreds of American expats move to Portugal every year!
For expats seeking rental accommodations, Portugal emerges as an attractive destination, offering both accessibility and diversity. In December 2023, the average cost per square meter stood at a reasonable 15.5 euros. Notably, the Lisbon metropolitan region led the pack with rentals surpassing 18 euros per square meter, while the North followed closely behind at an average of 13.7 euros.
For expats seeking a budget-friendly option, the Azores emerged as the most economical choice, with rental prices as low as 8.9 euros per square meter. Whether you’re aiming for city sophistication, northern charm, or island tranquillity, Portugal offers a range of rental opportunities to suit every preference and budget.
Real estate in Portugal overall offers a much better deal than you could get in most European nations, or even the US and UK.
Recently, the Portuguese cabinet approved a 30% reduction in mortgage rates for struggling borrowers. This subsidy, effective until year-end with potential renewal, underscores Portugal’s welcoming stance. But how easy is it for an expat to qualify for a mortgage in Portugal? Do you need a mortgage broker and how do you find one that’s qualified?
Let’s dive into some more details!
Availability of Housing For Expats
With bustling city life, historic charm, and serene retreats, Portugal emerges as an ideal destination for expats seeking their perfect home and mortgage in Portugal.
In Lisbon, the capital’s historic charm intertwines with modern amenities, while Porto’s UNESCO-classified centre and outskirts provide tranquillity at lower costs.
Braga, with its ancient churches and modern properties, appeals to those seeking heritage and affordability. Aveiro, known as the “Venice of Portugal,” offers a serene lifestyle with picturesque canals and Nouveau architecture.
Furthermore, expats will also find diverse housing preferences across regions. The Algarve attracts foreign investors with demand for second homes, focusing on one-story villas. While Porto sees a high demand for villa properties. In Lisbon, small flats are sought after.
In recent years, the availability of housing for expats has seen many challenges due to the limited supply and increasing demand.
Understanding Mortgages in Portugal
Unlike familiar UK or US lending practices, mortgages in Portugal have distinct conditions for residents and non-residents. Non-residents typically face loan-to-value ratios (LTV) between 65% and 75%, requiring a minimum deposit of 30% of the property’s purchase price.
Portuguese banks rarely offer 100% financing, with most citizens needing a 20% down payment. While banks might extend financing up to 90%, buyers aim for properties appraised higher than the purchase price to secure favourable terms.
Seeking professional advice can help navigate these intricacies, ensuring a smooth investment process in Portugal. For expats, getting a mortgage in Portugal through qualified experts is usually the only way to go about it, given the bureaucracy.
Types of Mortgages Available
For expats, mortgage in Portugal comes in two main types: variable-rate and fixed-rate. With a variable-rate mortgage, your interest rate can change over time based on the Euribor rate. Fixed-rate mortgages keep your interest rate steady for a set period, offering stability but possibly at a higher cost.
Most mortgages here require you to repay the borrowed amount and interest monthly. They typically last 25 years, but some lenders may offer up to 30 years. You’ll usually need to repay the mortgage by age 70, 75, or 80. Understanding these basics is key for expats navigating Portugal’s mortgage options.
Furthermore, expats can also access buy-to-rent mortgages and commercial mortgages. Buy-to-rent mortgages often require a larger deposit, up to 40% of the property’s value, and proof of income to cover mortgage payments. Commercial mortgages typically need a deposit of at least 50% and details about the business, including a business plan for new ventures.
To read more about Interest Rates and Terms click here
