This article will help you become informed about the process of getting a mortgage as a foreigner in Portugal. Let’s start with the current in-country conditions and then go over the necessary steps and information that you will need on the road to property ownership.
What to expect in the Portuguese real estate market
As with buying a property anywhere, location matters! You must first decide where you want to focus your real estate search; in the larger cities, popular coastal towns, or the rural countryside. The purpose behind your purchase (commercial or residential) and your budget will help you determine which region is the best fit.
According to GPG, both the economy and housing market across Portugal are on the rise, with increases in licensed and completed dwellings since 2015 and a major housing price boom. The graph below, using data from the Instituto Nacional de Estatistica and GPG, shows the current housing price boom since the end of the 2010-2014 financial crisis.
Lisbon, as the capital city with significant economic growth, is a reliable but more expensive initial investment. Similarly, there is the Algarve region in the south, Portugal’s most luxurious coastal region and a popular tourist destination. For less expensive properties, there is Porto, a fishing town in the more overlooked northern region of Portugal that has recently become a center for real estate investment. The Silver Coast in central Portugal has stretches of beachfront property and mountain views and has relatively lower prices as well.
As far as property types go, there are many options available. It's helpful to get familiar with some terms that you may hear while searching for a property in Portugal.
- Casa or Moradia: a traditional detached home
- Casa Geminada: a semi-detached home that shares one wall with the neighboring home
- Quinta: a rustic house or farm, generally sold with a large parcel of land
Apartments in Portugal may be described as T0, T1, T2, and so on. This refers to the number of rooms in an apartment. A T0 is a studio apartment, a T1 is a one-bedroom apartment, and so forth. There may be a +1 next to the symbol. For example, T2+1 means that the apartment has two bedrooms and one extra room without windows.
What are the requirements for taking out a mortgage loan?
Once you find your desired property, you will want to negotiate to reach a final price and explore your mortgage options. To take out a mortgage loan as a foreigner, you will need to make a down payment of at least 30%, and in some cases up to 50% of the purchase price. However, if you’re a fiscal resident, meaning you declare your taxes in Portugal and live there at least 183 days out of the year, you may be eligible for a down payment of 15-20%.
Be prepared for some additional mortgage-related fees associated with deed registration and survey/appraisal of the property, as well as property purchase costs such as property transfer tax (IMT), stamp duty, and legal fees. The IMT can be as high as 10% for non-residents but will vary depending on your situation.
Each bank will also have its own lending criteria based on your financial situation and the property valuation. Financial situation is assessed based on your current earnings (including salary, pension, dividend, rental, and investment income), pre-existing debts, employment history, and credit history.
Following the initial assessment by the bank, you can proceed with the mortgage application.
What documents are necessary for a mortgage application?
There are several documents that you will need when applying for a mortgage. This includes general documents and also financial reports that help the bank assess your financial situation.
There are different requirements for getting a NIF depending on whether you are a citizen of the European Union (EU) or European Economic Area (EEA), or a non-EU citizen. Here are the documents you need to apply for a NIF depending on your circumstance:
You and your tax representative, if necessary, must bring the mandatory documents to a local tax office in Portugal to apply for a NIF.
Once your application is complete, the bank will issue a formal mortgage quote and carry out a valuation of the property. Then, your funds will be transferred and you can sign the deed to become a property owner in Portugal!
Going forward on your mortgage journey
Now, you are more prepared to tackle the process of getting a mortgage in Portugal as a foreign national. You’re familiar with the ins and outs of the Portuguese real estate market, the conditions and requirements to apply for a mortgage, and the documents you will need to complete the process.