How to Apply for a Mortgage and What Expenses to Expect

Getting a mortgage in Portugal is very common. Portuguese banks offer mortgages both to residents and non-residents of Portugal. There are many advantages to buying a property in Portugal. Some of these include the relatively low real estate prices and little to no restriction on foreigners acquiring property.

It is easy for foreigners to get a mortgage if they plan on buying a property in Portugal. Most local lenders are well acquainted with the process. People can get mortgages for all real estate types, including residential, commercial, industrial, etc. Whether you’re buying a home, a shop, or a restaurant, you can leverage your investment for 25 to 30 years with competitively low interest rates.

How to apply for a mortgage in Portugal

When to start applying for a Portuguese mortgage

It is best to start applying for a mortgage in Portugal as early as possible on your property acquisition journey. You do not necessarily have to have decided on the property you will acquire. Starting early will prepare you for how much the down payment and other terms will be. This way, you can find out if you can afford the prospective properties or not.

Types of Mortgages in Portugal

There are two types of repayment options, one being a fixed rate and the other one being a variable rate.

Fixed-rate mortgage

Fixed-rate mortgages help borrowers pay the mortgage at a constant rate for a certain period. This period can be either one year or can be extended for as long as 30 years. If it is for the short term, it will convert into a variable-rate mortgage. The advantage of the fixed-rate mortgage is that it protects you from fluctuations in a bank’s rate and the European base rate. On the other hand, if you decide to repay early, you may have to pay a fine on the repaid capital.

Variable-rate mortgage

This is the most common type of mortgage. In Portugal, variable-rate mortgages start at a rate of 3.3% yearly when the loan-to-value ratio is 30%. As an alternative to this, the fixed rate is 4.1% (up to 5 years) when the loan-to-value ratio is up to 70%.

With this type of mortgage, you can end up paying different monthly amounts, depending on the interest rate. It may last as long as thirty years for most non-residents of Portugal. When you decide on early repayment, you will be charged on the repaid capital (0.5%) for the variable-rate mortgage.

The Variable mortgage rate in Portugal is indexed to the EURIBOR (a basic interest rate reference used to set the interest rates Portugal has on home loans).

The Minimum Deposit and Loan-to-Value Ratio

For non-residents in Portugal, the minimum deposit for a mortgage is 30%, and the maximum loan-to-value ratio is 70% of the purchase price. Most banks offer loans of up to 65%-75% of the property value or the sale price. In some cases, for fiscal residents, it is possible to borrow up to 85%-90% of the same price.

Required Documents to Apply for a Mortgage in Portugal

Portuguese lenders require a list of documents for the application for mortgages. In addition to the necessary documentation, you will be asked to present a few more documents depending on your employment status. You can see the required documents below:

  • Copy of passport
  • Portuguese tax number (NIF)
  • Proof of income
  • Personal bank statements for the last three months (including the incoming and outgoing capital)
  • Proof of address (i.e., recent utility bill)
  • Recent mortgage statement
  • Proof of savings or investment accounts
  • Bank reference letter
  • Purchase commitment or sales contract (of the property)

When employed:

  • Last year’s tax returns
  • Payslips for the last three months
  • Reference letter from your employer (a letter including the information about how long you’ve been working in the company, how much your gross annual salary is, and other incomes such as bonuses and so on)

When self-employed (when you hold at least a 20% share in a limited company):

  • Last year’s tax returns
  • Business bank statements for the last three months
  • Three years of company profit & loss and balance sheet

Other income:

  • Proof of pension income for the last three months
  • Copy of tenancy agreement for rental properties
  • The last three months’ statements showing rent received
  • Copy of investment certificates

In addition to these, the bank may require other necessary documents according to an assessment of the level of risk.

The Application Process

The first thing to do is to get in contact with a bank or a mortgage broker. After the initial assessment, you can follow the steps below:

Mortgage Quote

After the initial assessment, you receive a full quote within one to two days. There will be a charge for the formal quote.

Submit The Application Forms

You must complete a relevant application form after you receive the formal quote. Then you submit other necessary additional documents.

Mortgage Offer

If they approve the mortgage, you will receive an offer. Then your broker approves the offer and its conditions. They also help you with the rest of this procedure.

Valuation Report

The bank will prepare a valuation of the property. Details will be approved if the valuation amount is at least the purchase price and there is no legal issue about the property.

Arrangements for Completion

You must transfer the funds to the appropriate account before the date of completion. When it is proven that you have available funds, your lender will arrange the mortgage application. After this, the completion date will become certain.

Completion

You sign the property and mortgage deeds before the related Portuguese notary. You pay the related fees and taxes. After this, you will become the official owner of the property.

What Are the Fees Related to the Mortgage Application in Portugal?

what are the costs of a mortgage in Portugal

Mortgage Processing Fees

The mortgage processing fees when buying property in Portugal may vary depending on the specific circumstances of the mortgage and the lender involved. However, here are some of the common fees that buyers may encounter:

  1. Bank appraisal fee: The bank will typically require an appraisal of the property before approving a mortgage. The appraisal fee can range from a few hundred to a few thousand euros, depending on the size and complexity of the property.
  2. Mortgage arrangement fee: The mortgage lender may charge a fee for arranging the mortgage. This fee can be a fixed amount or a percentage of the mortgage amount and may range from a few hundred to a few thousand euros.
  3. Mortgage registration fee: When a mortgage is registered with the Land Registry, a fee is charged. This fee is typically a percentage of the mortgage amount and may range from 0.5% to 1%.

Lawyer Fee

The lawyer fee when applying for a mortgage in Portugal can vary depending on several factors, such as the complexity of the mortgage application, the type of property being purchased, and the lawyer’s experience and hourly rate.

Typically, a lawyer’s fee for handling a mortgage application in Portugal can range from a few hundred to a few thousand euros. It’s best to contact a lawyer directly to get an estimate of their fees and to discuss the details of your particular case.

Notary Fees

The notary fees when buying property in Portugal depend on the value of the property being purchased, as well as other factors such as the complexity of the transaction and the location of the notary. Generally, notary fees in Portugal are set as a percentage of the property’s value.

The current notary fees for property transactions in Portugal are as follows:

  • For property transactions up to € 100,000, the notary fees are 1.5% of the purchase price, with a minimum fee of € 75.
  • For property transactions between € 100,000 and € 250,000, the notary fees are 1.25% of the purchase price.
  • For property transactions between € 250,000 and € 500,000, the notary fees are 1% of the purchase price.
  • For property transactions between € 500,000 and € 1,000,000, the notary fees are 0.75% of the purchase price.
  • For property transactions over € 1,000,000, the notary fees are negotiable between the parties involved.

It’s important to note that these fees are subject to value-added tax (VAT) at the standard rate of 23%. Additionally, there may be other fees and taxes associated with buying property in Portugal, such as stamp duty and transfer tax.

Stamp Duty (IMI)

In Portugal, there is a stamp duty tax on mortgages when buying property. The stamp duty tax is a one-time tax paid by the borrower and is based on the amount of the mortgage loan.

As of March 2023, the stamp duty tax rate for mortgages in Portugal is 0.6% of the mortgage loan amount. This means that if you take out a mortgage loan for €100,000, you will have to pay €600 in stamp duty tax.

It is important to note that stamp duty tax rates can change over time, so it is always best to consult with a local tax expert or a qualified real estate professional for the most up-to-date information.

FAQ

What are the lending criteria for a mortgage in Portugal?

Usually, the banks analyze your financial position and the property’s valuation.

Which documents are accepted as proof of income?

When applying for a mortgage, foreign investors can prove their income with documents such as rental income, dividend payments, salary income, investment income, and pension income. These incomes are proven via payslips or pension slips, tax returns, and bank statements.

Is it possible to take out a mortgage for business purposes in Portugal?

Yes, if you plan to buy a property such as a restaurant or a shop for business purposes, you can take out a mortgage. The maximum mortgage you can take is 50% of the price or the valuation if the valuation is lower.

Can retirees take out a mortgage in Portugal?

Yes, if the retiree has a regular pension income.

Are there mortgages for construction?

Yes, there are. You can take around 50%-60% of the total cost of land and construction. However, it is best to consult a mortgage broker if you plan to apply for this kind of mortgage.

What is the cost of buying a house in Portugal?

Below are the taxes and other fees you need to pay when you undertake a home loan:

  • Property tax (IMT): Varies between 2% and 8%.
  • Stamp Duty Tax (IMI): 0.8% of the price of the property
  • Notary, registry, and tax office fees for property deeds: €1,200
  • Estimate of legal fees: €1,800

What is the age limit to take out a mortgage?

Most of the banks offer mortgages to borrowers aged up to 70 years. However, some banks accept individuals aged up to 80.

What is the loan term for residents and non-residents?

For residents, the banks offer terms up to 50 years, while for non-residents, the duration is up to 30 years.

Is it necessary to have life insurance while signing a mortgage loan?

Yes, you must contract life insurance when you sign a mortgage loan. Sometimes, some banks require home insurance as well.

What is EURIBOR?

Euro Interbank Offer Rate (EURIBOR) is basically a reference rate that eurozone banks use. It is based on average interest rates. Mortgage rates in Portugal also depend on this.

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Dasha Ponomarenko
Analyst / Customer Manager

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FAQ

Investment opportunities

What kind of properties do you offer?
  1. Properties under development for buyers with patience to benefit from the price appreciation after the project’s completion.

     

  2. We offer land plots for residential and commercial use to those who want to maximize their profits from the full cycle of value-adding activity.

     

  3. Commercial properties are for those who bet on more stable and long-lasting relationships with corporate tenants.

     

  4. Income houses for investors looking for steady income streams from residential property tenants.
How do you provide the investment opportunities?

We offer personalized investment opportunities to our investors through a tailored investment newsletter. Each newsletter is customized to match the investor’s specific budget and aligns with their unique investment strategy.

What are the criteria for evaluating income house investment opportunities?
  1. Growth Markets: We identify areas experiencing robust economic activities, such as job creation, population increase, and rising GDP. Infrastructure projects like new transportation systems, schools, and hospitals indicate a region’s potential for growth, attracting more residents and boosting the rental market.

     

  2. Positive Cash Flow: The property should generate rental income that not only covers all operating expenses (mortgage payments, property taxes, insurance, maintenance, and management fees) but also leaves a profit. Securing loans with low-interest rates and reasonable terms can enhance cash flow.

     

  3. Appreciation Potential: Properties in neighborhoods with growth potential or undergoing revitalization are likely to appreciate in value. The condition of the property and the potential for improvements (renovations, additions) also play a crucial role in its future value increase.

     

  4. Turnkey and Rent-Ready: We choose properties that require little to no refurbishment before they can be rented out. This ensures a quicker start to income generation. Properties should also meet all local building codes and regulations and have passed necessary inspections to avoid future legal issues.

     

  5. At or Below Fair Market Value: We conduct a comparative market analysis that helps assess the investment property’s value by comparing it to similar properties in the area. We identify motivated sellers or properties that have been on the market for a long time and may offer negotiation leverage, allowing purchases below market value.

     

  6. Risk Management: We evaluate potential risks, including market downturns, property damage, or prolonged vacancies, and devise strategies to mitigate these risks. This may involve insurance, reserve funds, or diversifying investment portfolio.

     

  7. Legal and Tax Implications: Fully understand the legalities of property ownership and management, including landlord-tenant laws and local regulations. Awareness of property taxes and potential tax benefits (deductions, depreciation) is crucial for financial planning and compliance.

     

  8. Exit Strategy: We develop a clear understanding of investors’ end goals (e.g., long-term rental income, property flipping). This strategy informs all decisions, from property selection to financing and management.
What are the criteria for evaluating land plot investment opportunities?
  1. Location and Zoning: The value of land is significantly influenced by its location and the zoning regulations governing what can be built on it. We look only for prime locations or areas poised for future development. Zoning determines the type of development allowed, and we aim for residential and commercial types.

     

  2. Growth Potential: We choose land plots in areas with strong growth indicators, such as population growth, economic development, and infrastructure projects, which suggest future demand for property.

     

  3. Accessibility and Utilities: We pick land with good access to roads, public transport, and essential utilities (water, electricity, sewage), as it is more valuable and easier to develop.

     

  4. Topography: The physical characteristics of the plot, including its topography and soil quality, affect its usability and potential development costs. We prefer flat land or land with gentle slopes that is generally less expensive to develop than hilly or flood-prone land.

     

  5. Environmental Restrictions and Easements: We are aware of any environmental protections or legal easements that could restrict the development or use of the land. This includes protected habitats, wetlands, or historical sites. We carefully choose land plots without anything forementioned.

     

  6. Future Development Plans: Information on planned infrastructure or commercial projects in the area can significantly impact the future value of land. We gather and analyze this kind of information to make meaningful decisions.

     

  7. Cost vs. Value: We carefully evaluate the purchase price against the potential for increased value. Land for development or likely to be rezoned for higher-value uses can offer significant returns.

     

  8. Exit Strategy: We understand how it’s better for investors to profit from the land purchase, whether by selling after appreciation or developing the land.
What are the criteria for evaluating new build investment opportunities?
  1. Builder Reputation: We investigate the builder’s track record, quality of construction, and reliability. Established builders with a history of delivering high-quality projects on time are preferable.

     

  2. Location: The property’s location is crucial. Look for new builds in areas with strong demand for housing, good schools, amenities, and transport links, which can drive up property values.

     

  3. Price Comparison: We compare the price of the new build with existing properties in the area to ensure you’re paying a fair price. New builds often come at a premium, so we ensure the extra cost is justified by the benefits.

     

  4. Warranty: We choose new builds that come with warranties (like a 10-year structural warranty). These can add value and reduce maintenance costs in the early years.

     

  5. Energy Efficiency: We choose new builds with high energy efficiency ratings and modern technical features that can be more attractive to tenants and buyers, potentially lowering operating costs and increasing attractiveness.

     

  6. Potential for Appreciation: We pick properties with the potential for appreciation based on location, quality, and market dynamics. Properties in areas expected to see growth in infrastructure and amenities offer higher appreciation potential and are on our radar.

     

  7. Rental Yield: We calculate the potential rental yield and compare it with other investments. Only properties with “working” math are on our list because this eases the execution of the exit strategy and may be beneficial for investors willing to get the “passive” rental income.

     

  8. Financing and Incentives: We look into financing options and any incentives offered by builders or their partnering banks, which can affect the investment’s affordability and attractiveness for investors.

     

  9. Exit Strategy: We choose properties that provide a clear and easily implemented strategy for maximizing return on investment, whether through long-term rental income or selling after appreciation (or both, by leasing while selling).
  10.  
What are the criteria for evaluating commercial property investment opportunities?
  1. Location: Prime location is crucial for commercial properties. We look for areas with high foot traffic, good accessibility, and proximity to amenities if it’s retail or a desirable business district for office spaces, or a touristic hot spot if we’re talking about hotels.

     

  2. Tenant Quality: We carefully study the current situation with tenants and analyze our possibilities. Properties that can be leased to reliable, long-term tenants (e.g., national chains) offer more stable income streams and are primarily on our radar.

     

  3. Market Demand and Vacancy Rates: We investigate the local commercial real estate market for demand trends and vacancy rates. Lower vacancy rates and higher demand indicate a healthier market – and that’s exactly what we are looking for.

     

  4. Economic and Area Development: We look into the economic health of the area and any planned developments. Growth indicators include new infrastructure projects, population growth, and employment rates.

     

  5. Property Condition and Age: We evaluate the property’s condition and age, as these will impact maintenance costs and the attractiveness to tenants. Newer or well-maintained properties are often more desirable but we also consider other options if the math works.

     

  6. Zoning and Regulations: We ensure the property complies with local zoning laws and is not subject to unfavorable regulations that could affect its use or value.

     

  7. Financial Performance: We analyze the property’s financials, including income (rental income), expenses (operating costs), and net operating income (NOI). We look for properties with a strong NOI and potential for growth.

     

  8. Financing: We understand the financing options and conditions. Commercial properties often require larger down payments and have higher interest rates than residential properties, so the finance product should be considered carefully.

     

  9. Exit Strategy: Whether it’s selling after appreciation, refinancing, or holding long-term for steady income, we ensure the property aligns with investors’ investment goals and timeline.
  10.  

Investment newsletter

What is your investment newsletter?

This is a tailored investment proposal newsletter that we send to each client who’s in the process of capital allocation. Usually, we send one investment opportunity each week or two (depending on the complexity of the request). To stop receiving it, you may just ask the customer service manager.

How does your investment newsletter look like?

We send a pdf file to any type of communication channel you preffer (email, whatsapp, etc.) with the following information that is well enough to consider if this property fits your interests:

  1. Property description
  2. Location description
  3. Market analytics
  4. Calculations breakdown
  5. Investment terms of the acquisition

Investment allocation

Can I participate in a deal with only a part of capital required to acquire the property?

Yes, you can. For this purpose, we propose certain investment opportunities to clients with similar investment preferences. We manage to form a sort of co-investment group where the participants may make a co-investment agreement and become partner-investors.

Who may be my partner-investors?
All our investors share our vision for transparency and “fair play” business ethics, and among them, we choose who may be a good fit as partner-investors based on similar investment preferences and goals.
What is the minimum investment amount?

The minimum real estate investment amount required in a co-investment scheme is € 250,000. If you are eager to acquire property on your own, the minimum amount should be € 1 million.

Holding of the investment

Do I need to do anything after investing?

No, you will only need to make the investment, and we will handle all the rest – from value-adding activities to selling the property or managing it to obtain passive income.

Do you provide any reports?
Yes, we provide monthly reports regarding the investment status with detailed information, and of course, our customer service is here to answer all the questions you may have on a daily basis.
Do you guarantee any return on investment?

No. And if some companies do – be careful. We provide you with viable and very probable scenarios how we consider things will go, which may, in fact, not happen. And this is something to remember – no one can predict the future.

Is it safe to invest in properties you provide?
Maybe the best thing many consider real estate’s main advantage is that the price almost can’t go to zero. Can the property market fall? Yes. Can the “black swan” fly by? Yes. Can we do our best to keep your investment safe? Yes, and so we do.

Quick Facts

  • Founded in 2020

  • Experienced management of 20+ years in real estate

  • 50+ HNW clients trust us with their real estate investments in Portugal

  • Operating throughout the country

Mission

We operate a real estate company dedicated to enhancing our clients’ wealth through investments in properties with high profit potential and low risk.

Investors working with us aim to preserve their capital while earning returns significantly above long-term inflation rates, through property appreciation and/or obtaining passive income.

Management

Why We

  • We provide weekly offers to our client base on an individual basis – we know exactly who wants what.

  • We offer only properties with high potential and moderate risk.

  • We provide detailed analytics for each investment opportunity.

  • We do thorough due diligence on each and every property.

  • We accompany you throughout the investment – from studying the potential deal to the exit.

  • We partner only with the best service providers in every local market.

  • Oftentimes, we invest along with our clients.
  •  

Investment Terms

  • Minimum investment – € 250,000
  • Holding period – 1-3 years
  • Target capital growth – 20-40% (10-30% yearly)
  • Target passive income yield – 5% and more

Our Fees

Finding Fee
€1500 This fee is paid when the investor makes an individual request for a property. It does not apply to the properties we provide in our proposal list.
Deal Structuring Fee
0,1 — 0,5% This fee is paid if the deal needs a tailored investment vehicle, usually an LLC, for tax efficiency, liability protection, and transparency between partners. This fee does not apply if the deal goes straightforward without any such structuring.
Value-Adding Activities Management Fee
10% This fee is calculated as part of the total construction (reconstruction, refurbishment) cost.
Performance Fee
10 — 15% This fee is calculated as part of the gross profit. It is paid if value-adding activities were performed or/and managed by us. It is calculated based on the difference between the total investment cost and the current appraisal of the property made by an independent professional.
Exit Fee
5% It is the same as the brokerage fee when selling the property. This fee does not apply if the investor decides to keep the property for use or lease.