Getting mortgage financing in Portugal from abroad

During the past years, the Portuguese property market has seen an increase in demand. This can partially be attributed to cross-border buyers that stood for 11% of property purchases in the country in 2021. The external demand from non-resident buyers has naturally resulted in higher Portuguese property prices, but it is not all bad news.

As a result of the large number of foreigners buying property, Portuguese banks tend to be open to lend funds to buyers from abroad. This is good news for foreigners wishing to find a second flat in Lisbon, or a holiday house on Madeira or the Algarve, but even more so for Portuguese citizens living abroad that wish to buy a home back home.

Even though several lenders are providing mortgages, the fact still remains that understanding bank requirements, eligibility criteria, and mortgage products is a time-consuming task. As a start, we have summarized what to expect when starting the journey of buying property and getting a mortgage in Portugal.

Read on to learn about mortgage terms from abroad or get in touch with our team to find out how to buy property in Portugal.

Mortgage terms when buying a property with foreign income

1. The repayment length of Portuguese mortgages can be up to 40 years, but as a foreign resident, you should expect your options to range between 5-30 years.
2. Lenders allow a maximum 35% debt-to-income level, meaning that your monthly loan expenses (including the new mortgage you are applying for) have to be less than 35% of your total monthly income.
3. Most lenders impose a maximum age for mortgage applicants, stating that the mortgage repayments have to be fully paid before turning 70, some might stretch this to up to 80 years old.
4. Deposit requirements range between 20-50% for foreigners but exceptions can be made, especially for Portuguese citizens buying from abroad.

Almost all foreign income is accepted by some Portuguese lenders, with the exception being applicants living and earning income in countries that face international sanctions.

Lower deposit requirement for Portuguese citizens moving back to Portugal

In general, Portuguese banks are the most favorable mortgage lenders globally when it comes to offering home financing for applicants from abroad. The terms can be summarized as:

• 85% Loan-to-Value (LTV) is obtainable for Portuguese citizens living abroad, buying a property in Portugal with the intention to move back and live in the property.
• EU nationals buying property in Portugal can get a 75-80% LTV mortgage.
• Applicants from outside EU should expect the mortgage LTV to range between 50-70%, depending on the currency they receive income in and the country they live in.

Types of mortgage repayments and interest rates

Non-residents will almost without exception be offered a principal plus interest loan, meaning that you will need to start the loan repayment in addition to interest payments from day one. Interest-only mortgages are available by some lenders, but these usually only apply for new constructions and are limited to a 2-year timeframe, after which amortization of the principal begins.

Both domestic and foreign buyers can be offered three types of interest rates, however, some banks limit their offering to only encompass one or two of the options for foreign buyers.

1. Fixed-interest mortgages are rather common in Portugal, with rates currently around 2.5-4%.
2. Variable interest rate mortgages, based on the Euribor reference rate currently range between 3-4%.
3. Mixed interest rate deals blend the fixed rate (for the first 3, 5, or 10 years) with the variable rate for the residual repayment years.

If you have come this far and wish to understand your personal mortgage eligibility and mortgage options in Portugal, please leave your information and our team will be glad to help you.