Guide: Mortgages in Portugal

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All about mortgages in Portugal. If you want to invest in property in the Algarve, expert advice can help you find the best mortgage for your needs. Learn how to apply and what documents you need to apply for a mortgage. 

Property in Portugal is a hot commodity right now. Buyers of many different nationalities are buying investment properties, second homes and retirement homes. The Algarve is one of the most popular regions of Portugal for property investment. Not only is the rental income attractive, there is significant capital appreciation on property in the area.
169.000 mortgages were agreed in Portugal in 2022, with Americans, British and Brazilians with a significant representation in that number. In Portugal, both residents and non-residents can apply for mortgages from Portuguese banks. Interest rates in Portugal have been among the lowest in Europe for some time, even despite the recent increases.

With sensible planning, good advice and by working with the right people, you can find the right mortgage for your particular needs. Ideal Homes Portugal is one of the Algarve’s leading real estate agencies. With many years experience, they know the market very well, know developers and locations, and have access to excellent investment opportunities. As a licensed mortgage brokerage, approved by the Bank of Portugal, their specialist brokers work with the major Portuguese banks to help you find the right deal to finance your property.

In the article below, their mortgage experts break down the process for applying for a mortgage in Portugal.
One piece of advice is to start the mortgage research and process as early as you can, even before you are ready to buy a property. This will allow you to understand how much you can afford and how much you may be able to borrow.

Mortgages in Portugal are fixed to the Euribor (Euro Interbank Offered Rate) and are either fixed rate or variable rate mortgages, or a mix of both.

Ideal Homes Portugal mortgage team is led by Nicholas Martins explains why working with them to obtain a mortgage makes sense:
We’re licensed and approved by the Bank of Portugal, and work with all the key Portuguese lending banks, to make sure we can pick the best mortgage deals for our clients from across the whole market.
Our advice isn’t limited only to Ideal Homes clients - we can provide mortgage assistance to anyone in Portugal, and we work with many clients who have already found a property elsewhere.

And he explains why it is better to work with them, than try to deal directly with the lenders:
There are several good reasons to work with us. As mentioned already, we have relationships with all the key Portuguese lending banks, including Caixa Geral de Depósitos (CGD), Santander, Novo Banco, União de Créditos Imobiliários (UCI) and Banco Português de Investimento (BPI). This means rather than trying to navigate through individual lenders yourselves, we can cherry-pick deals for our clients from what’s available across the whole market.

Then, my team and I offer local bi-lingual expertise. Getting your application right from the outset is key to securing the right mortgage. We know what needs to be done for a successful application and we will complete all the relevant paperwork and match your financial profile with the most responsive lenders.

When you work with us, you’re also engaging a larger service team, as we have real estate experts, lawyers and notaries on hand from Ideal Homes who will all help, if needed, to ensure each client’s purchase completes smoothly.

Lastly – it’s worth remembering, we don’t charge you for our mortgage service – we get paid by the lenders.

Guide to Mortgages in Portugal by Ideal Homes Portugal
Portuguese banks are typically lending up to 70% with a maximum term of 30 years, for applicants up to 75 years old. Variable mortgage rates from 4%, fixed rates from 4.75%.
In some instances, it is possible to obtain 80% financing.

Banks take two primary criteria into consideration when analysing your mortgage file for approval: Financial strength and property valuation, which will be assessed as follows:
Income. A bank will require proof of your current earnings such as salary income, dividend payments, investment income, pension income and rental income. This information will help the lender to ascertain if you can comfortably afford the monthly cost of your Portuguese mortgage. A bank will also consider the net income of each applicant confirmed by pay/pension slips, tax return and bank statements.
Existing debts. The lender will require confirmation by way of a credit report or loan/mortgage statement in order to analyse your monthly fixed commitments for existing liabilities such as mortgages, personal loans and credit cards.
Employment history. The lender will require proof of your current employment in the form of an employer's reference letter. If you are self-employed a bank will require information about your company, confirmed by your accountant.
Credit history. A bank will require a credit report from your country of residence (if available) and will also carry out a check with the Bank of Portugal for any existing liabilities in the country.
Property valuation. A bank will commission an independent engineer to value your property. Banks are currently lending between 60-80% of the valuation price. Ideal Homes Portugal will liaise with your appointed key holder and arrange a visit to the property with the designated engineer. We will also arrange for all necessary property documentation for the bank.

For advice and information on your specific needs, contact Ideal Homes Portugal