Mortgage for Foreigners in Portugal: Guide

Should I hire a mortgage broker as an Expat in Portugal?

Many expats find that engaging a mortgage broker significantly simplifies the process, offering several distinct advantages:

Benefits of using a mortgage broker in Portugal as a foreigner

• Market Access: Brokers maintain relationships with multiple lenders, providing access to a wider range of mortgage products than might be available through direct applications.
• Expertise: Specialized knowledge of the Portuguese mortgage market and familiarity with specific requirements for foreign buyers.
• Administrative Support: Assistance with document preparation, translation, and submission, often saving significant time and reducing stress.
• Negotiation Skills: Ability to negotiate more favorable terms based on market knowledge and lender relationships.
• No Direct Cost: Typically, the lender, not the borrower, pays for broker services.

Selecting a Reputable Broker

When choosing a mortgage broker:

• Verify their credentials and experience with foreign clients.
• Request client testimonials or references.
• Ensure transparency regarding their relationships with various lenders.
• Confirm all costs and compensation arrangements upfront.

Comprehensive cost breakdown for a mortgage in Portugal

Foreign buyers must budget for numerous costs beyond the property price itself:

Property purchase taxes and dees

• Property Transfer Tax (IMT): Ranges from 2% to 8% of the property value, calculated on a sliding scale based on property value and type (primary residence, secondary home, or investment property).
• Stamp Duty (Imposto do Selo): 0.8% of the property purchase price.
• Notary and Registration Fees: Approximately €1,000-€1,500 for property registration in the Land Registry.
• Legal Fees: Typically €1,500-€2,000, or approximately 1% of the property price.

Mortgage-specific costs

• Mortgage Application Fee: €200-€300
• Property Valuation Fee: €300-€600
• Stamp Duty on Mortgage: 0.6% of the mortgage amount
• Insurance Requirements: Life insurance is mandatory, and building/home insurance is typically required. While banks offer these products, comparing quotes from independent providers is advisable.

Total additional costs

Foreign buyers should budget for additional costs totaling approximately 7–10% of the property purchase price, beyond the down payment requirement.

The promissory contract: an essential protection

Pay close attention to the Promissory Contract (CPCV—Contrato Promessa de Compra e Venda), as it is a legally binding agreement that could have big financial effects.

Essential components of the CPCV

• Purchase price and payment schedule
• Property description and boundaries
• Completion date for the final deed
• Conditions for contract dissolution

The resolutive clause

It is imperative to include a conditional clause that specifically protects the buyer's deposit if:

• Mortgage approval is denied.
• The property valuation comes in lower than the purchase price.
• Legal issues are discovered during due diligence.

This clause should provide a reasonable timeframe (typically 20 to 30 days) for mortgage approval and legal verification.

Insights from the expatriate community

The collective experience of expatriates who have navigated the Portuguese mortgage system offers valuable practical insights beyond official procedures:

Recurring themes in expatriate forums and groups

• Patience is Essential: The Portuguese bureaucratic process often moves slower than expatriates from Northern Europe or North America might expect. Starting the process early and maintaining realistic timeframes helps manage expectations.
• Documentation Challenges: Many expatriates report challenges related to document translation, certification, and verification. Maintaining organized records, obtaining certified translations when necessary, and working with professionals familiar with international applications can mitigate these issues.
• Valuation Discrepancies: A common challenge involves bank valuations that come in below the agreed purchase price, requiring additional down payment funds. Conducting independent research on comparable properties in the area before making an offer can help avoid this situation.
• Language Considerations: While many banking professionals in Portugal speak English, particularly in areas with significant expatriate populations, important nuances can be lost in translation. Having a bilingual advocate (broker, lawyer, or translator) review all documents is highly recommended.
• Bank Selection Matters: Expatriates report varying experiences with different banks. Some institutions have developed specialized departments for non-resident mortgages and offer more streamlined processes and English-language support.
• Insurance Requirements: Some expatriates express surprise at the comprehensive life insurance requirements, which may include medical examinations. These can be particularly challenging for non-residents who must travel to Portugal for these assessments or arrange them in their home country.
• Relationship Banking: Several expatriates note that establishing a banking relationship in Portugal before applying for a mortgage can be advantageous, potentially leading to more favorable terms and a smoother application process.

Common pitfalls to avoid with your mortgage in Portugal

• Underestimating Timeframes: The process typically takes 1-3 months from application to completion. Planning for potential delays is prudent.
• Neglecting Legal Representation: Attempting to navigate the Portuguese property purchase system without qualified legal counsel frequently leads to complications and potential financial loss.
• Insufficient Financial Planning: Beyond the down payment, adequate funds must be available for all associated taxes, fees, and an emergency reserve for unexpected expenses.
• Poor Timing of the Promissory Contract: Signing the CPCV before receiving at least preliminary mortgage approval puts the deposit at risk unless proper conditional clauses are included.
• Multiple Broker Engagement: Some expatriates report complications arising from engaging multiple mortgage brokers simultaneously, leading to duplicate applications and potential credibility issues with lenders.

Recommended mortgage banks for foreign applicants

Several Portuguese banks have established reputations for effectively serving foreign mortgage applicants:

• Millennium BCP: Offers dedicated expatriate services with English-speaking staff and competitive mortgage products for non-residents.
• Santander Totta: Provides specialized services for foreign buyers with flexible mortgage options.
• Novo Banco: Known for competitive variable and fixed-rate options tailored to international clients.
• Caixa Geral de Depósitos (CGD): Portugal's largest state-owned bank offers a range of mortgage products with English-language support in many branches.
• Bankinter: Offers competitive rates and specialized international client services.
• UCI (União de Créditos Imobiliários): A mortgage specialist with experience handling foreign applications.

Essential first actions when applying for a mortgage in Portugal as an Expat

1. Obtain a Portuguese NIF (tax number) as the foundational requirement for all financial transactions.
2. Engage a reputable, experienced lawyer specializing in Portuguese property law and international clients.
3. Consider consulting a mortgage broker with specific expertise in assisting foreign buyers.
4. Research current market conditions and mortgage offerings from multiple institutions.
5. Prepare comprehensive financial documentation well in advance of property searching.