Portugal: Mortgages

Portuguese lending criteria

Do I qualify for a Portuguese mortgage?

To qualify for a mortgage in Portugal, a calculation is used to establish whether you can afford to maintain the mortgage repayments. This will automatically happen when you complete the application form, and Conti won’t charge you for this service.

How much can I borrow?

• Calculation based on the valuation of the property

• Up to 80% of LTV available for house purchase, remortgage, construction loans or home improvements

• Based on joint gross & net monthly pay, where joint income is applicable

• Existing liabilities, e.g. mortgage or rental payments, loans, credit card payments and maintenance are taken into account, together with the proposed Portuguese mortgage payments. All this must not exceed 40% of your monthly net income, or in some instances 45% of your monthly gross income.

What evidence of income do I need?

If you are employed:
• Your original last three month’s payslips
• Your latest original P60 and Employers Reference
• Your original last six month’s personal bank statements

If you are self-employed:
• Your last 2-3 year’s audited accounts and tax returns
• Your original last 3 month’s business bank statements
• Your original last 3 month’s personal bank statements.

Example mortgage payments

If, for example, your net joint monthly income is £2,500, 40% of this equates to £1000. If your only liability is your mortgage payment, of say £300, this would leave a balance of £700 for your Portuguese mortgage repayment

What types of Portuguese mortgages are available?
For our latest rates and to see the different types of Portuguese mortgages on offer, please visit our website or speak to one of our advisers.

• Loans available up to 80% of the property’s value
• The maximum term of any mortgage is 30 years, this varies on the type of loan
• Repayment and Interest Only mortgages available
• The minimum loan you can take out is €30,000

Essential information for buying properties in Portugal

Buying property abroad is not necessarily the same as buying in the UK, there is other essential information you need to be aware of both before and during your property purchase.

• It is of paramount importance to seek independent advice from an overseas solicitor.

• You need to ensure that you will have full title to the property on completion and that you have the appropriate documents available for the lender. Other documents such as the official plans of the property, a plan of the site and a copy of the caderneta predial, fiscal numbers and certidao de encargos may be required before the lender is able to carry out a valuation. These documents are usually available from your solicitor

• You should check with the estate agent and/or your lawyer that you are aware of the costs charged by legal and Government authorities for buying a Portuguese property e.g. SISA Tax is normally charged on the ‘Declared Price’. The solicitor may be incorporating costs for assigning the mortgage within his charges, along with the title deeds to the land registry. You should establish the actual cost of these before proceeding with a loan application. The lender will also have their own legal costs for assigning the loan, the cost of which they will normally advise you when they issue the mortgage offer. These associated fees/taxes are typically between 10% - 15% of the properties purchase price.

• Before signing the sales contract, the bank will require a copy of this document to be forwarded with the relevant application form. However you are able to sign this contract with the clause “subject to mortgage finance” as the contract, once signed is legally binding, and you may have to forfeit any deposit monies paid.

• Banks will require a Habitation licence before financing the final instalments of staged payments on the property.

• Properties can be purchased in either individual or joint names or in the name of an offshore company (with personal guarantees).

© Conti Financial Services Limited 2008

This article is reproduced with the kind permission of Conti Financial Services Limited.

For information and advice on overseas mortgages and residential finance in over 30 countries, contact Conti Financial Services Ltd on www.mortgagesoverseas.com