Getting A Loan In Portugal As A Foreigner [2022 English Guide]

Getting a loan in Portugal is common, and many Portuguese banks offer this option for non-residents. You can get in touch with these Portuguese banks if you want to get a model, and they will provide a chance for you to get your hands on the money if you have yet to become a resident of Portugal. 

First, you should know about the importance of purchasing your real estate property in Portugal because it has multiple benefits for you in the long run. You should go for this option if you are a foreigner because there is no restriction by the country on acquiring property for foreigners. This is not the case in many other countries; if you are moving to Portugal anytime soon, you should take advantage of this. 

If you are a foreigner, there is nothing to worry about when you are in Portugal because it is easy for you to get your hands on the mortgage if you are about to purchase a property in the country. You can get a mortgage on a real estate property and a commercial one. 

Even if you have an industrial real estate property in Portugal, you can also get a mortgage. It is very profitable for you in the long run because you can leverage your investment for 30 years with a low-interest rate.

When Do You Apply For A Loan In Portugal?

Once you have quite some sort of property in Portugal, then you can apply for a mortgage. It will not be a difficult journey for you, which is why there is nothing to worry about as a foreigner. If you start early, it will have multiple benefits for you and make you ready for the down payment. This is the right way for you to understand if it is affordable for you or not.

Types Of Mortgage Loans In Portugal

When you get a loan in Portugal, you will have two repayment options. Let’s take a look at them below.

Fixed-Rate Mortgage

Getting a fixed-rate mortgage will help you pay back the loan at a constant interest rate for a specific period. This period can be anything between 30 and 1 year. The good thing is that you can also convert this loan into an available-rate mortgage loan if it is for the short term. This type of loan is a feasible option for you if you want to avoid the fluctuations in the rate of the Bank and the base rate in Europe. However, if you repay on time, you must pay a fine.

Variable Rate Mortgage

You might have already heard about this type of loan because it is the most common type of Mortgage Loan. This Mortgage Loan starts with a rate of 3.3% per annum, and the loan-to-value ratio is 30%. As it is clear from its name, you have to pay a different payment every month, and it will depend on the interest rate. If you want an alternative, the fixed rate is 4.1% for up to 5 years. 

This Mortgage Loan can last for a maximum of 30 years and the minimum time is one year. However, if you repay early, you have to pay a fine on the repaired capital, which is 0.5%.

Why Should You Take A Loan In Portugal?

You should take out a loan in Portugal if you have a real estate property in another country with similar equity. This is the time when you can take out an additional Mortgage Loan. The reason behind taking out this loan can be financing the purchases that you are making in Portugal related to real estate. 

If you are a foreigner, you have nothing to worry about because the economic situation of Portugal has recently improved after the pandemic ended. You can quickly get a great rate from the lenders because they are willing to help the nonresidents in Portugal by providing them with feasible lending solutions in the long run.

Benefits Of Taking Out Of Mortgage Loan In Portugal

There are many benefits that you are going to get if you take out a Portuguese mortgage. The most significant advantage is that the lender is responsible for looking at the property legally and keeping all the legal checks by arranging the valuation for the property. The second significant benefit of taking out of a Portuguese mortgage is that you will decide whether to let your property in a long-term or a short-term contract. 

If your rental income is in your house, then it will easily cover the mortgage payments in your home, and all of this will be done by the bank in Portugal. There is no currency risk for you if you are a foreigner, and it is a safe process. You can decide whether you want to use a non-euro mortgage facility from any other country, but it will come with currency risk.

Other Benefits Of Getting A Portuguese Mortgage

 1. If you are a foreigner and do not have a residency in Portugal, get a new one and can still get a mortgage over here. It is an easy process, and all you have to do is to visit a Portuguese Bank.

 2. Interest rate is relatively low when you get a Portuguese mortgage.

 3. The installment rates are low when you get a mortgage in Portugal.

 4. You can rent out the property you purchased on credit, and there will not be any restrictions on you because you are a foreigner or a non-resident in Portugal.

When is the right time to apply for a loan in Portugal?

You should start the mortgage process while still considering purchasing some real estate property in Portugal. Begin this process as early as possible, even if you haven’t bought any property in the country. It is recommended that you start this suddenly because then you will be able to find out whether this process is a possibility for you and how much access you will get with the help of credit financing. 

This will also significantly impact your property search and streamline your entire process. This process will enable you to negotiate the property’s price and let them know that you are a serious buyer of real estate property in Portugal.

Conditions For Getting A Mortgage In Portugal

There are certain conditions you need to keep in your mind and consider before you apply for a mortgage loan in Portugal. Let’s take a look at the conditions below.

 1. The first condition for applying for a mortgage and Portugal is the interest rate you will get. If it is a home loan, the rate used is called Euribor.

 2. The second thing you must remember is the mortgage terms. Mainly the period for foreigners getting a mortgage in Portugal is a maximum of 30 years, but it can be 25 years as well, depending upon your situation.

 3. The lending criteria are another essential aspect to consider when applying for a mortgage loan in Portugal. This criterion depends on your financial situation. Your financial situation is determined after taking a look at your income as well as your earnings. Your debts and credit score will also be considered when they look at this criterion for you.

 4. The last condition is insurance when applying for a mortgage in Portugal. You also need to get Life Insurance and sometimes Home Insurance in rare situations.

Fees And Costs For Getting A Portuguese Mortgage

The fixed rate for a 5-year rate of up to 70% loan to value is 4.1%. 0.2% is the rate for early repayment. Regarding the variable mortgage, you will get 3.3% up to 30% loan to value. 3.4% is the rate up to 60% loan to value. In this situation, 0.5% is the fine that you have to pay for early repayment.

How much does it cost to purchase a house in Portugal?

Purchasing real estate property is easy for you as a foreigner in Portugal if you compare it to any other country. The property tax is anywhere between 2% and 8%. The stamp duty tax you must pay is 0.8% of the property’s price. The estimated legal fee is €1800.

Applying For A Loan In Portugal

Here are the steps you must follow to get a Mortgage Loan in Portugal below.

 1. The first step is the initial assessment, and then you can move forward with the next steps in getting the Mortgage Loan in Portugal.

 2. During the second step, you must submit an application form and all the required documents.

 3. Formal offer

 4. In this type, the property valuation will be conducted.

 5. In this type, you have to make arrangements for the completion of the sale, and it is a significant aspect when you are trying to get a loan in Portugal.

 6. The last step is completing the sale; you can get your hands on the loan.

Process After Initial Assessment In Getting A Mortgage Loan In Portugal

Mortgage Quote

Once you want to seed with the following steps after the initial assessment, you can receive a complete mortgage quotation within 24 or 48 hours. After that, the formal quotation is prepared.

Submission Of Application Form

Once you get a formal quotation, you must complete the application form. This application form is submitted with all the required supporting documents.

Mortgage Offer

You will receive a formal offer when the Portuguese authorities approve your application for the Mortgage Loan. Your broker will confirm this, and they will also help you with the proceedings and what you have to do next regarding your Mortgage Loan in Portugal as a foreigner.

Valuation Report

The Portuguese bank is responsible for carrying out the valuation of the property once you get the formal mortgage offer. The valuation should be at least the purchased price that was agreed upon, and there should not be any issues related to the property. Once this process is settled, the property purchase process will be completed and confirmed.

Completion Arrangements

The funds will be made available and transferred to the account before completion. Once these funds are available in the required account, the mortgage application will be processed by the lender, and the completion date will also be decided in the end.

Completion

The mortgage Lander is responsible for arranging the payment. Once the dead of mortgages are signed, and all the taxes have been paid, you will become the official owner of the new property you purchased in Portugal. If you want to ensure that you provide all the updated documents, the process will be completed on time.

Conclusion

Portugal is a variant active place if you are looking forward to moving here anytime soon and want to buy a property. It is not only about the location but also the lifestyle. The best part is that it does not have a lot of restrictions on foreign and nonresidents of the country, and they can easily apply for a Mortgage Loan and also purchase their real estate property in the country once they move here. 

You will get many different benefits if you get a mortgage in Portugal. First, it is a lovely country with a rich culture and a great housing market. The banking system is relatively modern, and you will enjoy living in this country because it is not super expensive like other European countries. There are no restrictions on you as a foreigner, and you can quickly get property ownership even if you are not a European citizen. 

First, you will have to obtain a golden Visa, and then you are good to go in applying for permanent residency in Portugal. Above, we have mentioned all the steps you need to take when applying for a loan in Portugal and how you can manage that efficiently in the long run. Good luck!