Portugal Mortgage
Non-resident mortgage specialist since 2003
Key themes
Large loan amounts
For larger purchase sums (from about €1 to €1.5 million), there are banks that offer their services especially for this category of non-resident buyers. These are Private banks or special departments of regular Portuguese retail banks. Therefore, in addition to the annuity mortgage, the interest-only mortgage is also offered under certain conditions. The financing setup will be designed to be fiscally optimal.
An installment-free mortgage can be offered for wealthy clients who are willing to have part of their assets managed by a private bank specializing in this. For example, it is possible to borrow 100% interest-free, provided that 50% of the loan amount is placed with the bank as “Assets Under Management.
An integral part of the services provided by the banks serving this category of customers is to minimize Portuguese taxes. To this end, they advise in consultation with you and Hypotheek & Buitenland on the design of the financing and its administrative set-up.
Financing without a bank
Alternatives to financing a Portuguese purchase project is to find one or more financiers outside of commercial banks. This could include friends or family or other wealthy “third parties” providing a loan. Crowdfunding (or peer-to-peer financing) platforms allow supply and demand to find each other for this type of financing. A specialized platform is being created for financing business plans and investment properties in Portugal. Please leave your details via the contact form if you wish to be kept informed about the formal launch date; both as a prospective investor and applicants for funding are invited to leave their details.
If supplemental bank financing is required or if commercial banks do not offer a possibility then friends or family can step in with a loan or donation. Even then, it is possible to establish a mortgage guarantee with the Portuguese house as collateral.
Through a crowdfunding platform, financing can be arranged for entrepreneurs and real estate investors. Investors can thus diversify their investments and benefit from interesting returns. Are you looking for financing for your business or investment property in Portugal or are you interested in investing in such projects with mortgage guarantee please leave your details via the contact form or by email. You will be informed of the formal launch of the platform specialized in this.
Funding rate
The maximum financing rate in Portugal is currently the same at all banks: as a non-resident buyer, it is currently possible to finance up to a maximum of 70% of the purchase price. Mortgage & Abroad has multiple contacts with nationwide banks Portuguese that cater to Non-resident clients. So there is something to choose from.
For Non-residents of Portugal, the maximum funding rate is 70%. The playing field of banks that can finance non-residents is limited, but there is certainly something to choose from. A handful of Portuguese banks have a separate department that also caters to non-resident customers.
For residents of Portugal, up to 80% can be financed. For residents, there is a wide choice of banks; even banks that do not have a separate department for Non-Resident buyers can go there.
There are currently no Dutch banks financing foreign houses.
The lower the loan rate the lower the risk to the bank and the sooner a bank will usually be willing to grant a mortgage loan. Keep in mind that it is not true that the lower the loan amount the easier it becomes to get a mortgage. For loan amounts under €100,000, the banks are not hot.
If the equity comes into the purchase of another loan, that is a problem for some banks. People want to see their own money come from savings.
Non-residents refers to buyers who are not yet (tax) residents of Portugal at the time of purchase.
Testing on income
Portuguese banks also test whether your income is sufficient to obtain a mortgage. The method of testing varies from bank to bank. Banks generally allow up to 30% to 40% of net income to be spent on loan charges, rent and alimony.
Most Portuguese banks require that income from salary derives from permanent employment. Some Portuguese banks are less strict about this or do not actively check it. The Dutch phenomenon of the declaration of intent is not known in Portugal.
It is possible to get a mortgage if the income comes from your own business. See further explanation on this under UNDERTAKERS
Portuguese banks look at retirement income from a certain age. Exactly what age varies from bank to bank. Sometimes they then use a certain weighting percentage (“pondering”) of current income as future retirement income, sometimes they look at the actual pension to be received.
If the pension income has already started then Portuguese banks will test with that pension income provided it is a pension guaranteed for the duration of the mortgage applied for.
Most Portuguese banks include existing rental income as income. In doing so, it varies from bank to bank what percentage of it is taken as income. One does not look at the net rental income: so the existing mortgage expense of a leased property will be considered in its entirety in the review of the mortgage application.
If the feasibility of a file depends on future rental income, an application will usually not be approved.
If there is no or little regular income, but the income comes from assets, some Portuguese banks are willing to look at the size of the assets to assume a certain fixed income from them. This sometimes assumes a fixed rate of return, or – if the income is demonstrably “perpetual” – looks at actual returns achieved.
For households with gross annual incomes higher than €150,000, there are more mortgage options. See more on this at BIG LOANS
Portuguese banks do not include income from WAO or WIA as income. Income from private disability insurance is generally included as income.
Entrepreneurs
Even if the income comes from self-employment, it is possible to get a mortgage from a Portuguese bank. However, one is reluctant to include profits not distributed to private parties that have remained in the company.
Portuguese banks are looking at profits for the past three years. At least 3 years of annual figures must be available and the company must exist for at least 3 calendar years. In addition to profits, they will look at sales trends and the equity position on the balance sheet.
The own B.V. must exist for at least 3 years and must have a healthy profit and sales development. The balance sheet should also look healthy with positive equity and an acceptable current account ratio with the owner. Portuguese banks count as income the salary and actual dividends paid. Sometimes banks are willing to consider potential dividend income (profits left within the company) as well.
If there is a multi-company structure, it is important to clearly identify the results and ownership relationships.
Portuguese banks do not want to give a mortgage to a foreign company.
Application process
There is only one chance to make a first impression at a bank: as far as we are concerned, it should be overwhelmingly good. After choosing a particular route toward realizing the desired mortgage loan (see also “preparation”), the application process begins. Five stages can be distinguished in the application process: 1. preliminary application 2. file, 3. submit, 4. monitoring and adjusting, 5. conclusion.
To verify that an application is indeed feasible – in principle – a preliminary application is often first submitted to the intended Portuguese bank.
A well-documented application is essential for a successful application. Unclear or gaps in documentation create the perception of additional risk on the part of the bank. Together, the documentation is completed to the point where all essential elements are substantiated.
Hypotheek & Buitenland creates a comprehensive cover letter explaining all the elements and translating them so that everything is 100% clear to the Portuguese bank. The application is completed with the bank’s application form after which it is submitted.
Once submitted, additional questions or requests for additional documents sometimes follow. Ambiguities are clarified and additional substantiation in the form of documents is provided. Where necessary, if the situation calls for it, the application will be adjusted. If an application is unexpectedly rejected then an attempt will be made to change the bank’s mind by convincing the bank they are wrong. Should that fail, consultation and, if possible, application for a mortgage with another Portuguese bank will follow.
Once the bank’s credit committee has given an in-principle approval on the mortgage application, the appraisal will be launched. It varies from bank to bank who initiates this and who directs the appraiser. The cost of the appraisal is for the mortgage applicant and is €250 to €500.
When the risk committee of the respective bank has given its approval and also the appraisal shows a sufficient value, the bank will give its final approval and send the credit offer and all legally required documentation. These documents contain all the details of the mortgage being offered (the loan offer) and also list the risks, warnings and obligations associated with the mortgage (standard information document). After observing the legally required 10-day reflection period (effectively 11 days), the loan offer can be accepted and the mortgage can be formalized and the purchase completed at the notary. If desired, a bank account in Portugal will be opened and insurance arranged with the assistance of Mortgage & Abroad.
The processing time for a mortgage application in Portugal varies greatly from bank to bank. Counting from the time the fully documented mortgage application is submitted, with some banks you will know where you stand after 2 to 3 weeks. With other banks, it takes as much as 2 to 2.5 months before there is a full agreement. Longer are the processing times for more complex mortgage applications such as when buying out a (former) partner, refinancing or financing new construction.
Some banks that do not have an employee internally who is familiar with the Dutch language ask for (sworn) translations of some documents, such as pay slips, tax assessments or other documents. The goal is always to minimize the translations required.
Mortgage Types
Portugal has a different financing culture than the Netherlands. Portuguese banks take a more classical approach, focusing on paying off the mortgage. Consequently, the annuity mortgage is virtually the only form of mortgage offered. In Portugal, it is a challenge to see the true cost of a mortgage. A mortgage with the lowest interest rate may still end up being by far the most expensive due to expensive mandatory side products such as term life insurance.
The annuity mortgage is the most widely used form of mortgage in Portugal. In the absence of mortgage interest deductions and a less sound pension system, the focus in Portugal is on paying off the loan through this form of mortgage.
Redemption-free is not currently offered in Portugal to non-resident clients. Only for a certain profile of customers with high income and assets are there options for a grace loan. This is offered by some private banks who do so on the condition that a certain portion of private wealth will be invested under their management.
Most Portuguese banks do not get excited about loan amounts below €100,000; in fact, they are not of sufficient commercial interest. Some banks even have a hard lower limit of €100,000. In practice, this means that it is more difficult to finance a house if the purchase price is less than €150,000.
Portuguese banks usually offer either a fixed interest rate for the entire term or a variable interest rate. Some banks also offer fixed interest rates for, say, 5, 10 or 15 years.
The interest rate offered varies from bank to bank. Because most banks mandate one or more “side products” such as term life insurance, comparing the true price of the mortgage becomes very clouded. For example, interest rates are very low at some banks, but it is still the most expensive mortgage solution below the line because the mandatory side products are very expensive. Thus, transparency leaves much to be desired, and the danger of comparing apples to oranges lurks. The catch in Portugal is quite often the mortality insurance; initially it is stated as a footnote and formality, but when all is said and done, the insurance premium often turns out to be sky-high and so does the effective interest rate of the mortgage.
Portuguese finance culture is somewhat similar to Dutch culture in terms of duration. Therefore, maturities of 25 years are quite common. Through Mortgage & Abroad, a 30-year term is also possible. See more information on maturities under “Age and maturity”
A closing commission of approx. ½% of the loan amount is common among Portuguese banks. In addition, legal fees may be an issue.
The amount of the premium of a life insurance policy is quite often the closing item and thus the snag with some Portuguese banks. At the end of a mortgage application process, the penny drops and the insurance premium turns out to be sky-high. Often by then it is too late to apply to another bank. Through Mortgage & Abroad, it is possible to take out a mortgage without mandatory side products. This does make what is offered transparent. See more information on term life insurance under “Age and Term”
Banks are commercial institutions, and especially for non-resident customers – for whom they have to go the extra mile – they often make it a condition that, in addition to the loan, other products must be purchased from this bank, such as a checking account and fire insurance. There are also banks that offer a discount on the interest rate if certain products are purchased. Mortgage & Abroad knows its way around this landscape and guides you past the pitfalls of overpriced products.
When repaying the loan early, a penalty is due from Portuguese banks. Consumers are better protected anyway than in the Netherlands, and the penalty for early repayment is capped by law in Portugal. The maximum early repayment penalty for a variable rate mortgage is 0.50% of the amount repaid early and 2% if it is a fixed rate mortgage. For example, some banks allow early repayment of up to a certain percentage of the outstanding loan amount each year without penalty.
A bridging loan is possible if the house being bridged on is also in Portugal. Bridging on a house located in the Netherlands or a country other than Portugal is not possible.
Releasing excess value through a mortgage is not possible in Portugal unless the amount to be released will be used to purchase another property. Releasing money for consumption purposes or to supplement retirement is therefore not possible.
It is still possible with some Portuguese banks to apply for a so-called post-financing for up to 6 to 9 months after the purchase. In other words, recover the funds advanced for the purchase through a mortgage.
Duration and Age
Regarding the age aspect, the financing culture in Portugal is different from that in the Netherlands. The maximum age at which a mortgage must be terminated is at age 75. This aspect has an impact on the maximum term and thus the feasibility of a mortgage application.
For non-resident buyers, maturities of 30 years are possible. In most Portuguese banks, the maximum term is 25 years.
The age at which a mortgage is applied for has an impact on the maximum amount that can be borrowed. This is because the maximum amount to borrow is lower when the monthly payments are higher. And monthly payments are higher with an annuity mortgage when the term is shorter.
Sometimes, for medical reasons, you do not succeed in obtaining death benefit insurance. Thus, if the bank requires death benefit insurance, it can be a showstopper for the mortgage. Contact us to discuss how to get around this problem.
Purchase route Portugal
When you have found the house you want to buy then the whole process of buying in Portugal starts. Below are the different steps of the process
Once the house is found then the first step is to agree on the price. Keep in mind that there are quite a few cowboy-type types operating as real estate agents who are very adept at pressuring a buyer to just agree to a purchase price and make a down payment as quickly as possible. Don’t be pressured and don’t fall into the trap of making a down payment to the real estate agent right away.
Start the application process well in advance. You may already be able to cut corners by submitting the application as soon as possible. See “APPLICATION PROCESS.
In doubt about the structural condition of the house? Then have a building inspection performed. Contact Mortgage & Abroad for advice on this.
Buyer and seller choose a notary. There are thousands of notaries throughout Portugal. Note that the role of the notary in Portugal is different than in the Netherlands. See also: GOOD PREPARATION
When the purchase price has been agreed upon, then it is time to instruct your attorney to begin his work. It is very unwise to buy a house in Portugal without the assistance of a lawyer. We can put you in touch with a good Dutch-speaking lawyer.
We can assist you in arranging a notarized power of attorney to complete the purchase from the Netherlands. We have contacts with a Dutch notary where the process of making the power of attorney can be arranged “remotely” (via video call).
The initiation of a purchase agreement is usually done by the selling broker. Get advice on the content from your attorney.
The condition precedent for financing is not common in the Portuguese sales contract. Contact Mortgage & Abroad to discuss how to set up a sale without the risk of losing the down payment.
The outcome of the mortgage application process is the receipt of the unconditional loan offer. After accepting the loan offer, the bank is ready to release the mortgage funds.
When the sale is imminent, your home should be insured for fire (and theft). Hypotheek & Buitenland has contacts with parties who can provide competitive quotations for this purpose.
Having a Portuguese bank account is indispensable when you own a home in Portugal. Mortgage & Abroad can help you open a bank account.
The actual purchase must be ratified by a Portuguese notary. He will legalize the bill of sale with his signature and formal stamp. Then the title deed can be registered in the Portuguese land registry, after which the buyer has officially become the owner. Notary fees are fixed and range from €500 to €1,000. Through the notary, a notarized power of attorney can also be drawn up after which the remote purchase can be made
How long the buying process takes depends on what delaying elements are involved. Some trajectories last 1½ months some 4 months. A trajectory of new construction is obviously longer.
New and remodeling
It is possible as a non-resident of Portugal to get a mortgage for new construction or renovations. However, this is subject to strict conditions by the banks. One wants to finance only construction projects done by official Portuguese contractors, and self-builds will not be financed.
The maximum financing rate for new construction is applied to the sum of the land purchase and total construction cost.
For renovations, the maximum financing rate is applied to the sum of all renovations for which quotes are available from official Portuguese contractors. Some banks are willing to apply the financing rate to the expected value of the property after renovations. If the property is not already “fully” financed, the renovations can then potentially be fully financed.
The process of getting financing for new construction done requires intensive guidance and is time-consuming. Hypotheek & Buitenland also accompanies these routes, but at a higher rate for the service compared to financing existing construction.
Applying for a mortgage when working with a Dutch contractor, “a male” or self-build does not finance Portuguese banks. Only when working with official Portuguese contractors can new construction or renovations be financed with a mortgage.
A fully documented building permit application should be made to local authorities. A suspensive condition should also be included when purchasing building land in case the building permit is unexpectedly not granted.
A bank will ask for a number of documents for approval of a mortgage application for new construction:
- Construction plan and architect’s drawing
- Total cost estimate of construction
- Construction timetable including payment schedule
- Certidão do Registo Predial of the plot
- Licença de Utilização – Land use designation.
- Building permit
- Signed construction agreement with contractor
Appraisal for new construction or remodeling is done by an appraiser’s assessment of the future value after completion (based on the building plans and the value of the lot).
Release of mortgage funds is made from construction deposits at the client’s call as works progress and invoices come in. Often, an interim appraisal then also takes place, checking whether the works have actually been carried out. The condition for release of the mortgage funds is that a mortgage guarantee has been placed on the land by mortgage deed. With most banks, the mortgage remains repayable until the construction deposit is drawn in its entirety (usually with a maximum term of max 2 years). Interest is then paid on the released funds and a commitment fee on the mortgage funds not yet released.
Rental objects
Seasonal rental of a Portuguese vacation home is quite common and mortgage lender Portuguese banks are fine with it. Only when a property is overwhelmingly going to be the source of the (only) income in the future do people not want to finance it regularly. Rental income is taxed in Portugal and not in the Netherlands. A tax return on this income must therefore be filed in Portugal.
Portuguese banks have no problem with seasonal rental of a house bought with a mortgage based on existing income. What is important is that the property is not too commercial in nature. So existing Bed & Breakfasts, hotels, or properties with multiple cottages or lots of rooms (with separate bathrooms) may lead the bank to conclude that there are plans other than purely private use and occasional seasonal rentals. When banks suspect that prospective clients have plans to “change course” and start or take over a tourism business in Portugal, they conclude that the existing income will end and that the requested mortgage is in fact business financing is.
The tax treaty between the Netherlands and Portugal provides that Portugal may levy taxes on assets in the form of real estate located in Portugal such as a second residence. As a result, the (net) value of a Portuguese house is taxed in Portugal and no longer in the Netherlands (box 3). Rental income is taxed in Portugal and therefore should be taxed in Portugal. Quarterly returns must be filed and a tax rate of 28% on the rental income -/- deductible expenses is involved.
Renting out a Portuguese house partially financed by a mortgage can be an interesting addition to retirement. When rental income covers the mortgage and other expenses then the house “comes to you” because after full mortgage repayment there remains a mortgage-free home that generates rental income.
There are several rental platforms for second homes. These platforms offer services of varying degrees. From rental mediation only (via a booking module) to complete outsourcing of the rental including local handling.
Acceptance of collateral
Portuguese banks are critical of the type of property to be financed. Houses that are not habitable or are located very remote are considered insufficiently current and are often not financeable through a bank.
Portuguese banks don’t want to finance all houses. Only those houses that are sufficiently current in their eyes, i.e. houses that – should the (financial) need arise – can be sold again somewhat smoothly, are they willing to finance.
Banks will want to receive extracts from the records at both agencies about the collateral to be financed to verify a multitude of data about the collateral. The core of this investigation is to verify that what has been built is legal.
Houses that are in such poor condition that they are Not habitable will not want to be financed by a bank. Core elements of this are that, at a minimum, a house should have running water, a somewhat up-to-date electricity supply, heating, a sewer connection or functioning septic tank, a kitchen and a bathroom. If the renovations required to bring the house into a good habitable condition are co-financed then this usually overcomes the bank’s objections.
Very remote situated houses – far from a village or town – and far from “civilization” are more difficult to finance than houses that are more “in civilization. There are also certain obsolete regions where banks are more reluctant to finance than in regions with booming housing markets.
Objects such as castles, wine estates, water mills, churches converted into homes are more difficult to finance. There is a (very) small market for this type of special property and sales can take years. Houses that are very A-typical for the region can also be a problem, as can houses with a lot of land (tens of hectares). Indeed, banks are wondering if such a “non-resident buyer” is going to manage to maintain all that land.
Contributing a very large portion of your own money to a purchase increases the chances of winning over the bank to finance. But for many objects, that is often not enough either. At issue here is the fact that the system of reclaiming collateral by auctioning it – as the ultimate consequence of no longer (being able to) meet monthly mortgage obligations – does not work well in Portugal in all regions. After all, sometimes a house also fails to sell at auction for a sufficient amount.
Houses or properties where it is abundantly clear to a bank that they will be operated as commercial properties in the future (for example, in the tourism sector) are not financed as second homes based on existing income.
Funding business plans
Mortgage & Abroad does not currently accompany applications for business financing in Portugal. Thus, we cannot help with mortgage applications for starting or taking over a property in the tourism sector, where it is clear that the existing income in the Netherlands will be lost. The services of Mortgage & Abroad are currently limited to mortgage advice and mediation for the purchase of a second or vacation home. For advice on business financing, see the section FINANCE WITHOUT BANK
If you have plans to start / take over a Bed & Breakfast , operate gîtes, buy or start a (mini) campground or hotel where the property to be purchased in Portugal is central and where the future income stream resulting from the business activities is required to meet the monthly mortgage payments, then that no longer falls under applying for a regular mortgage based on existing income. That’s when enterprise financing is involved. If you want to qualify, then – as in the Netherlands – a business loan will have to be applied for at a local bank where the business plan – and thus the future expected income stream – is the basis.
Hypotheek & Buitenland cannot guide you through this type of process and cannot assist you in applying for business loans from Portuguese banks. Our services are limited exclusively to advising and mediating the acquisition of mortgage credit where an existing and steady income forms the basis for the purchase of a second or vacation home.
An increasingly common route for funding business plans is to find a loan through a crowdfunding platform. For advice on this type of business financing, see the section FINANCING WITHOUT BANK
In some exceptional cases, it is possible for a property in Portugal – where the plan is to do business there in the future – to be purchased initially as a second home. This is possible only when a bank is convinced that there are no plans to move to Portugal in the near future and build a new life (with new source of income) there.
Purchase and ongoing costs
The “buyer’s fees” (also known as “notary fees”) generally include the total costs due in taxes and notary fees. These costs are twofold: one part the costs related to the purchase of the property and the second part related to the notarization of the mortgage. The amount of the total cost varies quite a bit in Portugal and depends on the amount of the purchase price. To illustrate: with a purchase price of €400,000 and a mortgage of €200,000, the cost is about 6.7% of the purchase price. Please contact Mortgage & Abroad if you would like a detailed calculation of the cost of buyer.
When buying existing construction, transfer tax – Imposto Municipal sobre a Transmissão Onerosa de Imóveis (IMT) – is due. It is calculated using a table, with the IMT being higher the higher the purchase price. For houses that are not the main residence, with a purchase price from €287,213, the percentage tax is 8% of the value -/- a flat rate of €11,035.25 (rate 2022). The tax rate is 6% for purchase prices from €550,836. In addition to the IMT, stamp duty, or Imposto de Selo, is also payable at 0.8% of the purchase price. In addition to the notary’s fee of approx. €500 are costs for recording the property in the registers of approx. € 465. The mortgage is also subject to stamp duty in the amount of 0.6% of the mortgage amount. In addition, the bank will also charge legal fees of approx. € 400.
New construction involves notary fees for the purchase of the land and costs associated with the notarization of the mortgage.
It is highly advisable to hire an attorney to assist you during the buying process. A lawyer performs an indispensable role and takes on many tasks that in the Netherlands are performed by the notary. A good lawyer more than recoups his fee. We can put you in touch with a good Dutch-speaking lawyer.
In addition to the cost of the buyer, other costs are often involved such as costs for an architectural inspection, the valuation, translations, legal, tax and financial advice and – if applicable – the formation costs of a Portuguese company.
Once you own the house, you owe local taxes annually. Basis of this tax is the tax value of the property and varies from municipality to municipality. The magnitude of this tax is between 0.7% and 1.3%. Also take into account the annual recurring costs, when purchased in a Portuguese company. Annual accounting and tax consulting fees are then involved.
The gain on sale tax is a tax meant to discourage property speculation and is due when you sell the house at a profit. Currently (2022), gains on sale are taxed at 28%.
About equity put into a Portuguese house, the tax treaty between the Netherlands and Portugal agrees that Portugal may in principle levy taxes on this. Specifically, although the house must be declared in the Netherlands in the tax return, a “double taxation avoidance” is applied that makes the net value of the house notincluded in the box 3 calculation. Portugal has no wealth tax like the Dutch box 3 levy. Portugal does levy a separate property tax on the value of the second home. An exemption of €600,000 applies here. Above that, an annual tax rate of 0.7% to 1% on the value of the house applies.
The Portuguese status of Residencia no habitual (RNH) gives those who become tax residents in Portugal and are accepted as RNH an exemption from paying income taxes both in Portugal and in the country of the source of income. This includes income such as pension, dividend, royalty and interest income. This status can be granted for a period of 10 years. Hypotheek & Buitenland has contacts with specialized tax specialists who can advise you on this.
You can find detailed information about Portuguese tax rules on the website of the Portuguese Tax Administration: https://www.acesso.gov.pt/unauthed/novoUtilizadorForm?partID=PFAP&path=/geral/dashboard it is necessary to register first with your NIF number, after which you will be sent an access code.
Good preparation
Being well-prepared is often half the battle and, once you get deeper into the buying process, it prevents stress and panic attacks. In short, to be well prepared is to buy carefully and in a controlled manner. We can assist you in the preparation process. We have an extensive network of specialists in the industry.
Is buying and owning a home in Portugal really for you? And how do you address it? There are legions of books available on this subject. We are happy to give you tips.
If you are going to buy a house in Portugal then some knowledge of the Portuguese language is indispensable. It starts with language, even in Portugal.
You cannot buy a house in Portugal without having a Portuguese tax number; the NIF number. Also known as the Número de Contribuinte. Contact Mortgage & Abroad about how to request this number.
If you do not know what you have to spend then you cannot search for a house. Get advice on this; based on available equity and your borrowing capacity, the buying budget can be determined. Contact us for a free exploratory “quick scan” and possibly a preliminary application to a Portuguese bank.
Good planning gives overview and thus control of your project. Create a timeline showing approximately how much time you will spend on each stage of the buying process.
Avoid dwelling too much on multiple thoughts (regions). Focus on a particular Portuguese region and thus avoid that too broad an orientation will take you too much time and it will only be searching and your plan will never become concrete
To be prepared for applying for a mortgage later, it is very wise to prepare for it at this stage. In fact, a lot of documents will be requested regarding your identity, income, expenses and future collateral.
If you have never bought a house in Portugal before, it is unwise to want to handle the purchase without outside help. You will find that it is impractical to have to reinvent the wheel on every subject. Moreover, a good advisor makes his money back. Map out which advisors you can approach. In doing so, it is especially important that you timely approach an attorney who will be un-lined to assist you legally with your purchase.
The role of the notary in Portugal is different from the role of the notary in the Netherlands. A Dutch notary assists clients with advice and checks and examines whether what is stated in a purchase agreement is correct. This includes the property’s registrations, the status in terms of any mortgage collateral that is on the property. However, a notary in Portugal has a different role than a Dutch notary. The notary in Portugal is more of an “action machine” who notarizes deeds and is hardly an advisor or controller. This is why it is also important to hire a lawyer when buying a house in Portugal.
We can help you prepare a notarized power ofattorney for the completion of the purchase from the Netherlands (so without having to travel to Portugal to sign personally with the notary). We have contacts with a Dutch notary where the process of making the power of attorney and apostille can be arranged remotely (via video call).
When it is clear that buying into a Portuguese limited liability company(Sociedade por Quotas (Limitada (LDA)), is the best choice for you, it is important to realize that you are going to set up a company in Portugal. There will have to be articles of association, a deed of incorporation, registration with the Portuguese Chamber of Commerce, and the company must be registered with the Portuguese tax authorities. In addition, a bank account in the name of the company will need to be opened. Buying within an LDA is considered fiscally sensible only from purchase amounts of about. €1 million. This is equally true of buying through an “off-shore company. We can put you in touch with a knowledgeable tax advisor.
Especially with somewhat larger purchase amounts, it is wise to think about “estate planning” in advance; in other words, avoiding paying (too much) inheritance and inheritance tax in the future. To this end, it makes sense to make choices regarding the legal design of the purchase prior to the purchase. Hypotheek & Buitenland can put you in touch with advisors specialized in this.
Mortgage transfer
Refinancing an existing mortgage on a Portuguese home is possible with some banks, but on modified terms. Furthermore, it is only possible to transfer loans that are notarized and with a mortgage guarantee.
The costs can be significant. In any case, you will face the penalty for early repayment of the current loan.
‘Revolving’ or refinancing an existing mortgage resting on the Portuguese house is possible with some Portuguese banks. The condition is that the current loan is notarized with a mortgage guarantee. Otherwise, banks don’t want to refinance.
The conditions under which Portuguese banks are willing to refinance are often different from those of a regular purchase. Typically, one is more cautious and one looks with critical eyes at the motive for refinancing. This is often reflected in a lower maximum financing rate and a shorter term.
When refinancing/transferring, you will face costs such as deregistering the existing mortgage and registering the new mortgage. But also with the bank’s filing fees, advisory fees and penalties for early repayment of the existing mortgage.
The key question, of course, is whether the costs outweigh the benefits.