Portuguese Mortgages.
Information on Portuguese Mortgages.
The developer or builder will sometimes offer a mortgage facility but in the event that you are unable to take advantage of this facility, you would have to arrange a mortgage independently.
We are able to direct you to independent mortgage brokers, who can then assist with arranging mortgages in the UK (for raising deposit monies for example) and with Portuguese mortgages. If you do join us for an inspection visit, we are able to provide you with a generic illustration of mortgage costs for any property during your tour.
Mortgages for off-plan property in Portugal are normally available for up to 80% of the lender’s valuation price and are available over 5 to 25 years but are typically of 15 years duration (maximum repayment date is normally the 75th birthday of the borrower) Lenders will not normally take into account rental income when calculating an applicant’s level of income and maximum borrowing limits are usually calculated assuming 30% of monthly income is used for the new mortgage. Self-certification mortgages are not normally available in Portugal although lenders can be more flexible with a larger %age deposit.
The bank will carry out a valuation of the property in the same way that a British lender would. However, it is fairly common for properties in Portugal to be down-valued by the bank which means that the percentage mortgage that will be offered is often less than the buyer had anticipated. The result is that a larger deposit (from alternative funds) has to be paid. This circumstance is more prevalent among re-sale properties rather than properties bought off-plan where the inherent value of the property will almost certainly increase between the time that the purchase is agreed and the build is complete.
A mortgage offer will not be granted unless the bank is satisfied that the property has been built to the planned dimensions, there is a relevant entry in the Land Registry and a habitation licence has been issued by the local council. As with property purchased in the UK, the bank will also require a first legal charge.
The general terms and conditions of your mortgage (if applicable) are normally set out or noted in the contract. Most Portuguese banks will charge an arrangement fee of up to 1% of the principal sum lent, which you will need to add to your completion expenses but the interest rates are generally lower than the U.K.
There are currently four types of mortgages available to non-residents in Portugal. Compared to the UK mortgage market, products are generally unsophisticated and some years behind the current range of products available in the UK. The following information illustrates what is typically available.
Capital Repayment Mortgage.
This is a general mortgage to purchase a property where you repay capital and interest during the whole term of the loan. It is a good option for those who wish to start gaining equity in their new property. You can usually borrow up to 80% of the valuation of the property for a typically, 20 years with this type of mortgage.
Interest Only Mortgage.
The interest only period can normally be for a maximum of five years. It is an attractive option for investors wishing to sell on after a few years, or for buy to let properties since it allows purchasers to start with low monthly repayments, thus enabling time to build up a steady rental income. You can normally borrow up to 80% of the valuation of the property for a maximum of 20 years (max. repayment date being the 75th birthday of the borrower) with this type of mortgage.
Leasing.
This is becoming a very popular option for clients wishing to borrow a higher amount for a longer period of time. It also allows for IMT tax (property transfer tax) to be financed depending on the valuation of the property. You can borrow up to 80% of the valuation of the property (but not more than the purchase price) for a maximum of 30 years (Max. repayment date being the 75th birthday of the borrower) with this type of mortgage.
Stage Payments.
For Purchasers buying off-plan or building their own property the loan is released in stages and interest is only paid on the amounts released during the maximum two-year build completion period.
