A guide to help foreigners get a mortgage on their dream property in Portugal. Learn all about the Portuguese real estate market, and the conditions, requirements, and documentation for a mortgage application.
So, you’re interested in buying a property in Portugal. With its Mediterranean climate and thousands of kilometers of Atlantic coastline, Portugal is surely the place to be. According to Global Property Guide (GPG), Portugal has some of the lowest housing prices per square meter in western Europe. The natural beauty and low prices make Portugal an excellent opportunity for real estate investments.
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.
Image caption: Average house prices across the regions of Portugal from 2011-2022.
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.
Additional market conditions
The European Mortgage Federation (EMF), in their 2023 country report for Portugal found that the average interest rates on new loans more than tripled when compared with interest rates from 2021. This is happening at the same time that interest rates are skyrocketing across the globe.
In 2019, 99.7% of home loans concluded by the Banco de Portugal were realized via mortgage loans. Nearly 75% of mortgages had a variable interest rate (with up to 1-year initial fixed-rate period) and variable interest rate loans continued to be the most prevalent in 2022. The average maturity of mortgage loan agreements concluded in 2022 was 30.7 years. Generally, mortgages for non-residents are between 25 to 30 years.
Despite interest rate increases, EMF found that non-residents continue to participate in increasing amounts in the Portuguese real estate market.
What are the conditions and requirements for taking out a mortgage loan?
Portugal is welcoming to foreign nationals, both on a personal level and when it comes to providing mortgages. Given that a few conditions are met, Portuguese banks are very willing to help non-residents finance a property investment via a mortgage. There are no restrictions or visa requirements for foreigners looking to buy property in Portugal. Additionally, through a real estate investment of €280,000+ in low-density areas to €500,000+ in others, you may be able to qualify for a Golden Visa through which you can obtain a residency permit and apply for citizenship after 5 years.
Once you find your desired property, you will want to negotiate to reach a final price and explore your mortgage options. Since July 2018, loan-to-value (LTV) ratios in Portugal are capped at 90% for permanent residences and 80% for other purposes. However, to take out a mortgage loan as a foreigner, you will need to make a down payment of at least 30% (corresponding to a 70% LTV), and in some cases up to 50% of the purchase price. 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.
Additional Financial Reports
Pay or pension slips *
Portuguese Tax Identification Number (NIF)
Last year’s tax returns
Proof of address (i.e. recent utility bill)
Energy certificate of the property
Bank statements *
Infrastructure certificate sheet
Existing loan or mortgage statements (if applicable)
If employed: Employer’s reference letter
Payment of the stamp
* From the last 3 months
A tax identification number (NIF) is issued by the tax authorities of Portugal. Having a NIF does not automatically make you a tax resident in Portugal, but it is necessary for mortgage applications and many other administrative tasks. You can apply for a NIF at any time, whether you are a foreign national, non-resident, or resident.
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:
Passport or citizen identification card
Passport and entry visa for Portugal or EU
Proof of address in Portugal (e.g. rental agreement, utility bill)
Proof of address in the EU
Appointed tax representative and proof of their registered address, and bank statement (less than 3 months old) as proof of address outside the EU
€10.20 application fee
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.
This whole process might still seem a bit daunting, especially if it’s your first time buying a property abroad. Luckily, an international mortgage broker can help make the process much easier. We can guide you through the entire process and help you find the best personalized loan offers, saving you both time and money. Our professionals and international contacts are here to support you on your journey to owning a home in Portugal. Click here to visit our website, sign-up, and get help today!