Buying property in Portugal as a foreigner. A step-by-step guide
Finding the perfect property can be challenging, but fortunately, foreigners can get a mortgage in Portugal to maximize their property budget. Continue reading to learn all you need to know if you're considering relocating to Portugal or buying a holiday home.
Portugal embodies a blend of natural beauty, welcoming communities, and a high quality of life. It's no wonder this country is a dream destination for digital nomads and foreigners enticed by the exciting prospect of buying a property in Portugal.
Continue reading to learn all you need to know if you're considering relocating to Portugal or buying a holiday home. You’ll find valuable insights about getting a mortgage as a foreigner to maximize your property budget.
If you want to secure a mortgage from abroad easily, be sure to explore Homevest.
How easy is it to buy property in Portugal as a foreigner?
Buying property in Portugal as a foreigner is generally straightforward and clear.
There are no special requirements, but getting a Portuguese tax identification number (NIF) is necessary to buy a property or get a mortgage.
The standard procedure for obtaining a NIF number is to visit your nearest Finanças (Portuguese tax office) and apply for it in person. This process is entirely free for residents of the EU/EEA.
How much does it cost to buy a property in Portugal?
The location you choose will significantly impact the price you pay for a property in Portugal. Lisbon has the country's highest property prices, while rural regions offer more diverse price ranges.
In addition to the property cost, it is important to consider the additional fees and taxes you must pay.
For instance, property tax can vary between 1% and 8%, depending on the purchase price, property location, and whether it is your first or second home in Portugal.
Where is the best place to buy a property in Portugal?
Some of the best places to buy property in Portugal include Lisbon, Loulé, Albufeira, Cascais, and Porto. These cities offer a range of appealing characteristics, including cultural attractions, desirable locations, and affordable property options.
Lisbon is a popular spot for digital nomads and Americans, British citizens, or Germans interested in buying a holiday home. British buyers particularly favor Loulé, while Porto is popular among American, French, and German buyers.
The best place to buy a property in Portugal ultimately depends on your preferences and priorities. Before deciding, consider lifestyle, proximity to services, investment potential, and personal preferences.
What’s the process of getting a mortgage in Portugal as a foreigner?
Finding the perfect property can be challenging, but fortunately, foreigners can get a mortgage in Portugal to maximize their property budget.
The process of obtaining a mortgage in Portugal typically involves the following steps:
#1. Application submission: submit your mortgage application to one or multiple banks with the required documents.
#2. Approval or dismissal: the bank will review your application and decide within 48 hours, either approving or dismissing it based on their assessment.
#3. Property selection and pre-contract: if you have not already chosen a property at the time of the application, you can proceed to select one. Once selected, you may sign a pre-contract with the seller.
#4. Agreeing on terms: negotiate and finalize the mortgage terms with the bank, including the interest rate, repayment period, and other relevant conditions.
#5. Property Appraisal Report: the bank will arrange a professional appraisal to assess its value. This process typically takes around 10 days.
#6. Scheduling the signing: the lender can help coordinate the signing of the mortgage agreement, involving the seller, buyer, and potentially a realtor if applicable.
#7. Signing the mortgage agreement: this legal process solidifies the terms and conditions of the mortgage.
The mortgage process may vary depending on the lender and individual circumstances, so it is recommended to research and compare different options.
What documents are required to get a mortgage in Portugal as a foreigner?
When purchasing a property and obtaining a mortgage in Portugal, you will be required to provide the following documents:
Identification documents
- Passport or ID
- Portuguese Tax Number (NIF)
Proof of income and liabilities
- Credit liabilities report from country of residence
- Last tax return
- Employer reference letter, indicating the type of contract and length of service
- 3 last pay slips (or proof of other regular income for employees)
- Evidence of savings and other income
- Bank statements for the last 6 months
- Proof of payment of the last 6 months of other loans
Property documents
- Copy of the Promissory Contract of Purchase and Sale Agreement (CPCV)
- The deed or land registration document of the property to be purchased
If you are self-employed, you will need to provide the company’s balance sheet and last income statement. For retired individuals, it’s necessary to provide proof of the previous year's annual pension.
What are the best mortgages in Portugal for foreigners?
UCI, Millennium BCP, and Banco PBI are some of the banks from Portugal that provide mortgage options for individuals with foreign income.
UCI Portugal Mortgages
UCI is a great choice for financing new buildings, fixer-uppers, and a good option for self-employed applicants. The bank serves a wide set of non-resident applicants with currencies including EUR, CZK, DKK, NOK, SEK, CHF, GBP, HUF, RON, BGN, CAD, QAR, ISK, JPY, USD, AED, AUD, HKD, SGD, BRL, ZAR, and MXN.
With a loan-to-value ratio of up to 70%, UCI offers competitive interest rates of 1.64% plus Euribor 6m. The loan term ranges from 5 to 30 years.
It is worth mentioning that customers have the convenience of submitting the required documents in their original languages.
Millennium BCP Mortgages
Millennium BCP is an excellent choice for mortgage applicants living and earning income outside the EU.
With Millennium BCP, you can borrow between 25.000 and 2.000.000 EUR at a variable rate of 1.75% + Euribor 6m.
It is important to note that if all the required documentation is in order, the Deed can be scheduled within 72 hours.
Banco PBI Mortgages
Banco PBI is the best choice for Portuguese expats living abroad and applicants living in the EU.
The variable rate is 1.8% + Euribor 6m, and the term range varies between 5 and 30 years.
Homevest could be a great solution to help you understand and centralize your cross-border house-buying experience into one place.
Filling out the application form and uploading the required documents on the Homevest platform can be done in just a few minutes. Once your documents are reviewed and forwarded to eligible banks, you can expect to be contacted by the banks within 10 working days.
Discover more banks that offer financing in Portugal for foreigners and learn about the best Portuguese mortgages.
What taxes do you pay when buying property in Portugal?
When buying property in Portugal through a mortgage loan, there are several taxes and expenses that you may be required to pay.
Here are some standard taxes associated with property purchases:
The property tax or the Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT) is based on the purchase price, property location, and whether it is your primary or secondary home in Portugal.
Remember that in Portugal, you must pay a property tax (Imposto Municipal Sobre Imóveis) as an owner of a property. The municipality determines IMI, and varies between 0.3% and 0.45%, with rural areas taxed at 0.8%.
Buying property in Portugal after Brexit
Portugal allows foreign nationals to invest in property without any restrictions.
Even though the UK is no longer part of the EU, you can still purchase a property as easily as before. Mortgage decisions are based on affordability and your ability to repay the loans, so Brexit has not affected your rights.
Frequently asked questions
Is buying property in Portugal a good investment?
Whether you want a holiday home, retirement property, or rental investment, Portugal's real estate market offers excellent opportunities to invest your money. Property prices can differ significantly. While major cities have seen notable price hikes, the rural areas along the Lisbon coast still offer comparatively affordable options.
Can I buy property in Portugal as a US citizen?
US citizens face no restrictions when it comes to purchasing property in Portugal. In fact, Porto stands out among the cities in Portugal with the highest foreign demand for properties on sale, with North Americans ranking at the top of the list.
Buying a property in Portugal is significant, and navigating the system in a new country can be challenging. Thankfully, Homevest is here to make purchasing your dream house in Portugal a reality.
Sources used and checked in July 2023:
- Property prices in Lisbon
- Property prices in Porto
- Property prices in Cascais
- Property prices in Albufeira
- UCI Portugal mortgages for foreigners
- Millennium BCP mortgages for non-residents
- Banco PBI mortgages for foreigners
- Portuguese towns with most foreigners
We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.