What are the bank’s requirements for real estate financing?

Article by Viv Europe - Official Legal and Relocation Partner to KipperTree.

07 02 2024

For advice about moving to Portugal cont Viv Europe here.

Bank’s requirements to concede a real estate finance can vary according to many conditions. Personally, I’ve heard many compliments about Millennium bank for granting credit.

Below, we will mention some popular requirements when it comes to real estate financing.

Tax Number (NIF): This is a mandatory requirement, no matter which bank you choose. Obtaining your NIF must be your first task if you plan to acquire a property.

Residence Permit: This document proves that you legally reside in Portugal. Most banks require this document to open a credit account for the buyer. In some cases, the passport can also be used, along with other documents.

Income in Portugal: It may seem obvious, but the bank needs to be sure that you will be able to pay the monthly instalments related to the financing. That is why proof of income (which may be related to an employment contract, self-employed income, company dividends, etc.) is required.

Income outside Portugal: It may be that the buyer lives outside Portugal and wants to buy a property for when he/she decides to move to this country, or perhaps the acquisition is an investment, as the owner will lease the place. That is why income outside Portugal will be analyzed as the most important document to prove the ability to pay the instalments.

Available funds: Along with the monthly income, the buyer must prove that he/she has sufficient resources to pay the instalments if, for example, she/she loses his / her job. The more funds available, the better.

Guarantees: The bank has to make sure that, in the worst-case scenario, it can be paid in any other way by the client’s debt. Thus, some commonly required guarantees are: creating an escrow account, appointing a guarantor, mortgaging another property, etc. This is a complicated situation for foreigners, as most guarantees must be located in Portugal.

Property certificates: These are the documents that must be analyzed by lawyers. The bank will require all documents that prove that the property is ready to be sold by the seller. The bank will not risk putting money into a transaction that may not be carried out (which would likely cause money to be lost).

Property inspection: Finally, there is the inspection of the property. Not all banks do a property inspection to make sure it is physically according to the documents. This is a practice that should always be performed. After all, the bank is putting a lot of money into the business.

These are just some requirements that Portuguese banks usually require to finance a property.