Relocation to Portugal can be an exciting yet sometimes daunting experience. One of the key concerns for many people planning to relocate to Portugal is understanding how to secure a mortgage in their new home.
This article will outline the steps you’ll need to take when applying for a mortgage in Portugal.
Benefits of taking a mortgage
Taking out a mortgage in Portugal is possible, and it can be very beneficial.
- First off, it can often be the best way to buy your dream home when otherwise it wouldn’t be possible.
- It can help you to save money on interest payments over the long term.
- It can give you the security of knowing that your home is paid for and that you will not have to worry about making rental payments in the future.
- A mortgage can help to improve your credit rating, which may be beneficial if you ever need to take out a loan for another purpose.
- Even foreigners and expats with no Portugal residency can still get approved for a mortgage from Portuguese banks.
- Properties that have been purchased on credit can still be rented out.
- In general, mortgage installment rates are low.
Types of mortgages available
A few different types of mortgages are available for people planning a relocation to Portugal. Some common types of mortgage products include fixed-rate mortgages and adjustable-rate mortgages.
A fixed-rate mortgage in Portugal explained
A fixed-rate mortgage in Portugal is a home loan with an interest rate that remains the same for the entire term. The main advantage of a fixed-rate mortgage is that it provides borrowers with predictability and stability, which can help them budget their monthly expenses.
The monthly payment will not change with a fixed-rate mortgage, even if interest rates rise. This can benefit borrowers on a tight budget who need to know exactly how much they will need to pay each month.
What is a variable-rate mortgage?
A variable-rate mortgage is a type where the interest rate can change over time.
This means that your monthly payments could go up or down depending on changes to the base rate. With a variable-rate mortgage, you could benefit from lower interest rates if they fall, but you could also pay more if rates rise.
How to apply for a mortgage
Get a quote: Upon completing the initial assessment, you will receive a full mortgage quote within 24-48 hours.
A formal quote generally carries a fee.
Application time: The next step after receiving a formal quote is to complete and submit the application form, including all the required documents.
You’ll get an offer: If your application is approved, the next thing you can expect is to get an offer. If this is the case, the mortgage broker will assist you with the process.
Valuation report: The bank will conduct a valuation report of your property once you have received a formal mortgage offer.
Preparation for completion: Property purchase funds must be available and transferred to the appropriate account before completion.
Once you have demonstrated that the funds are available, the lender will proceed with the mortgage application and notify you of a completion date. Once the property and mortgage deeds are signed in front of a Portuguese Notary, the property becomes yours, and all associated fees and taxes are paid.
Documents needed for a mortgage
- Passport copy
- Portuguese tax identification number (NIF) – you will need to register for a Portuguese tax identification number, although this does not necessarily mean you are a tax resident and liable for income tax in Portugal.
- Income proof
- Statements of incoming and outgoing cash for the last 60 days
- Utility bill received recently
- Statement of recent mortgage payments
- Savings or investment account proof
- Reference letter from a bank
- Details of the property – purchase commitment or sales contract
Documents vary depending on your employment status, e.g., employed, self-employed, or retired.
Employed
- Tax returns for last year
- Pay slips for the last three months
- A letter of reference from your employer (stating your gross annual salary, bonus, etc.)
Self-employed
- Tax return for last year
- Bank statements for the last three months of business
- A three-year profit and loss statement and balance sheet of the company
- Income from other sources
- Last three months’ pension income confirmation
- Tenancy agreement for rental properties
- Statements showing rent received for the last three months
- Certificates of investment
Conclusion
In conclusion, applying for a mortgage in Portugal can be a beneficial and manageable process for those looking to relocate.
There are a variety of mortgage options available, including fixed-rate and adjustable-rate mortgages, which provide predictability and stability for budgeting monthly expenses.
The process of applying for a mortgage involves getting a quote, completing an application form with required documents, and preparing for completion by ensuring that property purchase funds are available and transferred.
Required documents may include passport copies, a Portuguese tax identification number, income proof, and statements of incoming and outgoing cash. Overall, with the right guidance and preparation, securing a mortgage in Portugal can be a straightforward process and help you to own your dream home.