16 Critical Things to Know About Buying in Portugal in 2024

Summary

In this interview, Kaylee discusses securing mortgages in Portugal for foreigners with Raphael, a top mortgage broker. Raphael explains that non-residents can secure mortgages with foreign income tax documents. He discusses current interest rates, the role of a mortgage broker, eligibility criteria, and the loan approval process. Raphael also covers the steps from pre-approval to securing a property, including legal representation and negotiation of terms. He advises on shopping banks for the best rates, the possibility of using mortgage funds for renovations, and selling properties with mortgages. Raphael emphasizes the current favorable conditions for foreigners seeking mortgages in Portugal.

Takeaways

• 😀 Non-residents and foreigners can secure a mortgage in Portugal using income from abroad without needing to pay income tax or hold a visa.
• 💡 Current mortgage rates in Portugal are around 3%, significantly lower than rates in the US, UK, or Canada.
• 📊 Mortgage brokers in Portugal, like Raphael, provide proposals from different banks, allowing clients to choose the best offer with no upfront fees.
• 🏡 The key eligibility requirements include proof of income, a minimum down payment of 20%, and a debt-to-income ratio that doesn't exceed 50%.
• 📅 The mortgage process typically starts with a one-hour video interview, followed by document submission, and pre-approval within a week.
• 🔒 Fixed-rate mortgages are recommended for better cash flow management, while mixed rates (fixed then variable) are also popular.
• 💼 After pre-approval, it's advisable to secure the property with a small deposit (around €2,000–€3,000), allowing time for bank approval and appraisal before paying the rest.
• 📑 A lawyer is crucial for assisting non-residents with the entire purchasing process, including opening a bank account, signing the deed, and paying taxes.
• 🏠 On a €250,000 property, expect to pay 20% (€50,000) for the down payment and 5% (€12,700–€13,700) for closing costs.
• 💡 Portugal has favorable conditions for both residents and investors, offering benefits like low annual property taxes and the ability to rent out properties, which can cover mortgage payments.

Q & A

Can a non-resident secure a mortgage in Portugal using foreign income?

Yes, you can secure a mortgage in Portugal using foreign income without needing to be a resident or declare income tax in Portugal. You need to provide documents like income tax forms, pay stubs, bank statements, and a credit report from your home country.

What are the current mortgage interest rates in Portugal compared to other countries?

In Portugal, the interest rates are around 3%, which is generally cheaper than in the US, UK, or Canada. The market expects rates to decrease in 2024 and 2025, but the rates are already fixed at around 3% by the banks.

What services does a mortgage broker provide in Portugal?

A mortgage broker like Raphael provides access to multiple banks, helping clients get various loan options based on their financial details. The broker assists throughout the mortgage process, from pre-approval to closing, without charging clients directly as they receive a success fee from the banks.

What are the key eligibility criteria for getting a mortgage in Portugal?

To be eligible for a mortgage, applicants must have at least 20% for a down payment and 5% for closing costs. Banks assess the debt-to-income ratio, so paying off existing debts can increase the chance of approval.

How long does the mortgage approval process take in Portugal?

The mortgage approval process generally takes about two months. This includes the initial pre-approval, appraisal, signing of the promissory contract, and finalizing the loan with the bank.

What types of interest rates are available in Portugal, and which one is preferable?

Three types of rates are available: variable, fixed, and mixed. The fixed rate is preferred for stable cash flow, though the mixed rate is popular, offering fixed rates for an initial period before switching to variable.

What should a buyer be mindful of when signing a promissory contract in Portugal?

When signing a promissory contract, it’s important to negotiate terms like allowing time for the bank’s appraisal and setting a smaller deposit initially. It's recommended to finalize larger payments only after the property appraisal is complete to ensure all documents are in order.

Is it necessary to have a lawyer when purchasing a property in Portugal?

Yes, especially for non-residents, it's recommended to have a lawyer to assist with the promissory contract, opening a bank account, certifying documents, and handling taxes and legal matters during the transaction.

What are the typical costs and expenses for purchasing a €250,000 property in Portugal?

For a €250,000 property, you’ll need a 20% down payment (€50,000) and around 5% for closing costs (€12,700 to €13,700), including taxes, mortgage fees, and other expenses.

Can someone sell their property in Portugal if they still have a mortgage on it?

Yes, a property with a mortgage can be sold. Upon closing, the bank will receive a portion of the selling price to settle the mortgage, and the remaining amount will be given to the seller.