How Did We Get Here
Since interest rates are low, financing the purchase of a property through a national bank loan could be an interesting option, especially because since 2010, Portuguese banks have not been lending as much as they are now. Like any mortgage application, it can be a very time-consuming and laborious process, so it's crucial that you provide all the most up-to-date documents at once to avoid delaying the process. This is a tricky type of mortgage to commit to as with all the financial uncertainty at present the interest rates could fluctuate quite dramatically.
As a foreigner or non-resident, if you are looking to buy property in Portugal and want to use a mortgage to finance the purchase, now is a good time because the banks are lending again thanks to the economic recovery and the solid real estate market.
Available up to 60% of the property purchase price with rates from Euribor + 2.1%. In Portugal, they can account for up to 10% of the property price, so you need to ensure you can handle those as well as the required deposit out of your cash reserves. For example, global banking giant Santander has a Portuguese operation, offering many of the same accounts and deals that you can get elsewhere in the world.
A notable issue for tax purposes is that non-residents are taxed only on their Portuguese income. Finance is also available to build or renovate a property and three banks Real estate agents Algarve are currently offering mortgage finance to UK, Delaware or Malta companies to purchase a property, or for the client to purchase a company already owning a property.
Don't forget that Portugal has a tax called IMT which is similar to the Stamp Duty Tax in the UK. Add approximately 7% to 8% to the purchase price to give you an indication of what you might expect to pay IN TOTAL, including legal fees, transfer fees and taxes.
Alternatively, fixed rates are available at 4.1% for up to 5 years based on loan to value ratios of up to 70%. Whether you are looking to own a home or a business in the sun, the mortgage requirements in Portugal are similar to the process in France or Spain - and the property prices can be competitive.
Both residents and non-residents can apply for a mortgage from Portuguese banks. Most mortgages can be arranged with terms of 25 years (for non-residents) and 30 years (for residents), usually up to a maximum age of 75. For non-residents, some banks have a maximum 20-year term.
According to a report from the Royal Institutional of Chartered Surveyors (RICS) on the outlook for Europe's real estate markets, Portugal is, in fact, one of the economies leading the euro area recovery with sales and prices expected to continue rising at a steady pace over the medium term.
This is complicated by the fact that banks lending in Portugal do not always offer the same conditions to clients, even if they have similar profiles. A better option is to use a mortgage broker, who is used to dealing with this type of transaction, knows exactly which banks and branches to ask, and can probably secure you a better rate.
