Mortgage in Portugal from the UK: your complete guide

Dreaming of sitting back and taking in the sunshine by escaping to a warmer part of the world? Mortgages in Portugal for UK residents are a hot topic right now.

Keep reading to see how to navigate the post-Brexit world, and you could be there in no time!

Can a UK resident buy a house in Portugal?

Portugal remains one of the countries most open to property purchases made by non-residents, including those currently residing in the UK. Banks like CGD, UCI, and Santander offer a range of mortgages based on GBP income, many of which could suit your needs.

Is it hard to get a mortgage in Portugal?

The vast majority of UK borrowers with a good credit score will be able to successfully apply for a mortgage in Portugal. 

There are no specific restrictions on getting a mortgage in Portugal from the UK, and the process requires you to tick many of the same boxes as in the UK:

• A full-time job with a secure income will increase your chances of being approved for a mortgage
• A clear declaration of your number of financial dependents will help gauge affordability
• A clear track record of stable income if you are self-employed and run your own business

Now that we've covered the basics, it's time to focus on the numbers.

How much deposit do you need to pay for a mortgage in Portugal?

Mortgages in Portugal for UK residents typically require a deposit of 20% to 50%. Exceptions can be made when a Portuguese citizen is purchasing from abroad.

Factors influencing the size of the deposit you will need include:

• Whether or not you have resident or non-resident status
• Your credit score and an assessment of your affordability criteria
• Whether or not your salary is currently paid into a Portuguese bank account

Can I get a 100% mortgage?

As a non-resident, you can borrow 50-80% of the property's total value, which is less than the up to 90% that residents can borrow. If you are granted resident status, you could also borrow a higher multiple of your annual salary.

Your credit score in the UK will be assessed by a Portuguese lender during your application. This means that payment defaults, CCJ's, and other sources of bad credit will move with you across borders.

Affordability limits typically demand that your monthly mortgage payments and existing debt repayments are not more than 35% of your monthly net income. 

If you want to become a Portuguese resident, you will need to spend a minimum of 183 days a year in Portugal. You must also pay local taxes and have a registered address in the country.

What Portuguese mortgages are available for UK buyers?

If you find yourself asking, can I get a mortgage in Portugal from the UK? you'll want to take a look at some of your options:

• Novo Banco: A broad range of fixed-rate and variable-rate mortgages are available to full-time or self-employed non-residents. Investment and insurance funds are also available
• Millennium BCP: Non-residents can access up to 2,000,000 EUR of borrowing power—desirable for those looking to make a luxury purchase
• BPI: Loans range from 75,000 to 1,500,000 EUR for those looking to purchase a second home in Portugal
• Santander: 80% financing for non-residents provides a high degree of flexibility
• UCI: A range of mortgage solutions designed to streamline the process for self-employed borrowers

Homevest's service can help you and your family figure out the best Portuguese mortgage for UK buyers. It is free to use, and Homevest only earns a commission from the lender at the end of the mortgage application process.

How do you apply for a mortgage in Portugal from the UK?

You're already dreaming of the sunshine and long dreamy evenings, so the last thing you want is for the paperwork to put a stop to it all.

Let's take a look at everything you need to know to apply for a mortgage in Portugal from the UK.

Documents requirements

• Proof of identity: passport or photo ID card
• Proof of current address: a signed housing contract, utility bills, or a council tax bill
• Proof of employment: a copy of your current employment contract
• Proof of earnings (self-employed): a copy of your company accounts, the previous six months bank statements, and a copy of your latest tax return
• Proof of your income: the previous three months of bank statements—some lenders may also require a reference letter from your bank

While this may sound like a lot on the surface, all you're doing is proving who you are and that you have enough money to support your application. You would also have to follow this standard practice in the UK.

Lenders will also request to see some or all of the following so they can check the property you intend to buy:

• The Property Plan so they can see key details like size, location, and utilities
• Tax Registration Documentation that shows all property taxes are up to date
• An Energy Rating Certification to assess the long-term value of the property
• A Professional Building Survey that covers the structural integrity
• A Valuation Assessment used to gauge the current value of the property
• Land Registry Documentation that clearly shows who the current owners are
• A Notice of Habitation Document that declares the property is safe to live in

Anything else you need to know on the paperwork front?

You must get a Tax Identification Number (NIF)—the Portuguese equivalent of a National Insurance Number in the UK.

You can apply for an NIF in person at a Tax & Customs Office. If you are a UK citizen, you will need to bring your passport. If you are an EU citizen currently residing in the UK, you only need your civil ID.

The situation is more complex for those who cannot currently get legal residency in Portugal. In such cases, you must nominate a local tax representative—many choose their lawyer—to make a mortgage application.

Portuguese bank account

When buying a property in Portugal it is highly recommended to set up a Portuguese account. The process is simple and no eligibility restrictions are placed based on nationality or residency.

Mortgage conditions

• Debt-to-income ratio: a ratio under 35% is typical. The precise figure will vary from lender to lender
• Loan-to-value ratio: a 50-80% ratio is typical for non-residents
• Age requirements: a typical Portuguese mortgage lasts 25 years. The majority of lenders require the mortgage to be repaid in full by the time you are 70-80 years old
• Insurance: taking out Fire Insurance is mandatory, and Life Insurance is highly recommended

For those looking to streamline the process, Homevest is a digital solution that can help you consolidate your credit file in a single central location. This is ideal when you want the freedom to apply to multiple banks and lenders at the same time.

What are the taxes when buying property in Portugal?

While no homebuyer wants to pay more tax than they have to, knowing the basics will help with your budgeting:

• Property tax: typically between 1-8% of the property's value
• Notary & Land Registry: this will cost you 800-1,000 EUR
• Lender's Valuation Fee: charged at 500-800 EUR in most cases
• Legal Fees: expect to pay 1-3% of the total value of the property
• Estate Agent Fees: paying 5% is typical in Portugal

Frequently asked questions

Now that we've covered the fine details, it's time we answered some of the common questions that are bound to be on your mind.

How long can I stay in Portugal if I buy a house?

You can stay in Portugal for up to 90 days before becoming a resident. If you want to stay longer, you will need to get a residence permit from Portuguese Border Services.

Is property cheaper in Spain or Portugal?

Generally speaking, property will be cheaper, and fees will be less in Portugal than in Spain. However, there is an interesting exception to this rule of thumb when you compare the two capital cities:

• The average property price is 12% lower in Portugal than in Spain
• Homes in Madrid are 10% cheaper than homes in Lisbon
• Fees in Spain can be slightly higher than those in Portugal

You can see an in-depth comparison of Spanish & Portuguese mortgages with this handy comparison article.

What are the mortgage rates in Portugal?

The average mortgage rate in Portugal has been stable at 4.20% since June 2023. This is very close to the Eurozone average of 4.05%. The precise rate you will get depends on your choice of lender and individual circumstances.

Does buying property in Portugal make it easier to get a visa?

It's important to note that property investment no longer counts towards a Golden Visa application. This scheme is now fully subscribed and is no longer offered.

Getting a mortgage in Portugal is simple and accessible for non-residents.

Rates are competitive compared to the Eurozone average, the checks and capital requirements are similar to the UK, and you can remain for up to 90 days before applying for residency. This all adds up to an attractive proposition when you're looking to escape to a sunnier part of the world.

The next step is to take a closer look at your mortgage options with the help of some local knowledge. Many non-residents use the Homevest service to connect with expert brokers and secure the most favorable rates.

Continue reading to discover how Suranga, a UK citizen, used Homevest to secure a mortgage and buy a property in Portugal.

Sources used and checked in April 2024:

1. Fire Insurance Portugal
2. Golden Visa in Portugal
3. Mortgage rates in Portugal

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.