Getting a Mortgage in Portugal
– The Facts
Portugal’s location, being such a short flight from the UK, in the same time-zone and benefitting from great weather (tempered with a cooling Atlantic breeze) coupled with excellent infrastructure and tourist facilities has seen it become very popular with UK citizens buying holiday homes. If you’re thinking of buying now while prices are depressed, this simple guide should give you a good idea of what to expect:
How much can I borrow?
The maximum amount you can borrow with a Portuguese mortgage is 70% of the value of the property. The same percentage is available if you are remortgaging. Minimum mortgage amount is €50,000
What are the Interest Rates?
Portugal is in the Eurozone where at the time of writing (Mar 2013) rates are a little higher than in the UK. However, much like the UK mortgage market there is a wide range of mortgage products available so an accurate rate will depend on your circumstances though you should reckon with interest rates of 4.59-5.84%.
Are there any income requirements?
Portuguese banks have strict affordability criteria which means that, including the mortgage you are applying for, the total of all debt service payments you have to make (inculding your UK mortgage and any other personal loans you have in the UK or elsewhere) cannot be more than 35% of your net income.
What else do I need to know about Portuguese mortgages?
The maximum mortgage term available is 30 years and the maximum age for getting a mortgage in Portugal is 80 years. Both repayment and Interest-only mortgages are available.
How do negotiations work?
This is very similar to the UK. A network of Agents through the country will give you a selection of properties to choose from and you can make offers as you would in the UK. Don’t forget too that we can put you in touch with a selection of bank repossessed properties available at vastly reduced prices too. Call us for details.
What is the Legal process like?
Portugal’s legal system is established and has some unique and praiseworthy features. There is a clear process to be followed when buying a property in Portugal:
The first step in the legal process is the “Contrato de Promessa de Compra e Venda”. This is a legally binding contract setting forth the conditions of the sale. Upon signing the Buyer is required to pay 10-12% of the purchase price and should they subsequently pull out of the purchase, this will be forfeited.
There are instances where the deposit is refundable, for example, if the Vendor turns out not to have free and clear title to the property being sold.
An interesting feature of the CPCV is that if the Buyer walks away they only lose their deposit, but if the Vendor pulls out for any reason, then they have to pay the Buyer TWICE the deposit amount. As you can see, from the outset, the Portuguese conveyance systems is geared only towards those who are serious about transacting providing an unparalleled level of protection for all parties involved.
Once the CPCV is signed, the buyer then needs to get a “Fiscal Number” from the local Tax Office – this is a requirement for Portuguese nationals and foreigners alike. This is attained by completing and submitting a simple form.
Another official requirement on the Buyer is the payment of the “Imposto Municipal Sobre” – a standard Property Purchase tax
Finally the buyer will need to register the deed, either personally or via a lawyer, with the Land Registry Office
Overall Portugal has one of the best legal systems for conveyance of property. Combined with the Portuguese mortgage we can get for you, you should be in a good position to choose a perfect holiday home. Fill in the form and get in touch today.