Portugal's location, being such a short flight from the UK, in the same time-zone and benefiting from great weather (tempered with a cooling Atlantic breeze) coupled with excellent infrastructure and tourist facilities has seen it become very popular with UK citizens buying holiday homes. If you're thinking of buying now while prices are depressed, this simple guide should give you a good idea of what to expect:
Portuguese mortgages: what you need to know
- Typically the maximum you can borrow is only 70% (possibly 80%) and remortgages are not available in Portugal.
- Rates vary, typically between 3.5-5.25% depending on your circumstances
- Portuguese banks also have affordability criteria based on income
- Your total monthly debt repayments cannot exceed 35% of your net income, however there are some banks that can stretch this to 40%
How much can I borrow?
The maximum amount you can borrow with a Portuguese mortgage is 70% (possibly 80%) of the value of the property (Remortages are not available in Portugal). Minimum mortgage amount is €100,000
What are the Interest Rates?
Portugal is in the Eurozone where at the time of writing (April 2016) rates are a little higher than in the UK. However, much like the UK mortgage market there is a wide range of mortgage products available so an accurate rate will depend on your circumstances though you should reckon with interest rates of 3.5-5.25%.
Are there any income requirements?
Portuguese banks have strict affordability criteria which means that, including the mortgage you are applying for, the total of all debt service payments you have to make (inculding your UK mortgage and any other personal loans you have in the UK or elsewhere) cannot be more than 35% of your net income.
What else do I need to know about Portuguese mortgages?
The maximum mortgage term available is 30 years and the maximum age for getting a mortgage in Portugal is 80 years. Both repayment and Interest-only mortgages are available.
How do negotiations work?
This is very similar to the UK. A network of Agents through the country will give you a selection of properties to choose from and you can make offers as you would in the UK. Don't forget too that we can put you in touch with a selection of bank repossessed properties available at vastly reduced prices too. Call us for details.
What is the Legal process like?
Portugal's legal system is established and has some unique and praiseworthy features. There is a clear process to be followed when buying a property in Portugal:
- The first step in the legal process is the "Contrato de Promessa de Compra e Venda". This is a legally binding contract setting forth the conditions of the sale. Upon signing the Buyer is required to pay 10-12% of the purchase price and should they subsequently pull out of the purchase, this will be forfeited.
- There are instances where the deposit is refundable, for example, if the Vendor turns out not to have free and clear title to the property being sold.
- An interesting feature of the CPCV is that if the Buyer walks away they only lose their deposit, but if the Vendor pulls out for any reason, then they have to pay the Buyer TWICE the deposit amount. As you can see, from the outset, the Portuguese conveyance systems is geared only towards those who are serious about transacting providing an unparalleled level of protection for all parties involved.
- Once the CPCV is signed, the buyer then needs to get a "Fiscal Number" from the local Tax Office – this is a requirement for Portuguese nationals and foreigners alike. This is attained by completing and submitting a simple form.
- Another official requirement on the Buyer is the payment of the "Imposto Municipal Sobre" – a standard Property Purchase tax
- Finally the buyer will need to register the deed, either personally or via a lawyer, with the Land Registry Office
Overall Portugal has one of the best legal systems for conveyance of property. Combined with the Portuguese mortgage we can get for you, you should be in a good position to choose a perfect holiday home. Fill in the form and get in touch today.
Lastly, to get the best rates on your foreign exchange transactions we strongly recommend you open an account with HiFX. Quite simply, they will provide a far better exchange rate than your bank and they can do one off transactions or allow you to lock in a guaranteed FX rate on mortgage payments for up to one year in advance. To find out more and sign up, visit their website here http://www.hifxonline.co.uk
Overseas Mortgages are not regulated by the Financial Conduct Authority, nor are they protected by the Financial Ombudsman Service or Financial Services Compensation Scheme. They may not be covered by the home regulator of the country concerned either, so you should consider the risks carefully.
Are you looking for Overseas Mortgages?
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What is needed to apply
Applying for a Overseas Mortgage is very easy. Below are listed the things you need in order to apply.
- Eligibility Criteria Clean credit and sufficient income to make repayments is required.
- Documents Required Initially just an application form but in time you will be asked to prove income and ID
- Additional Comments The entire process takes 6-8 weeks depending on the country you are buying in
FAQs for Overseas Mortgages
- What countries can I get a mortgage in?
Almost any. Though the popular destinations for UK residents buying overseas tend to be France, Spain, Italy, Portugal and the USA, mortgages can also be achieved in Turkey, Australia, New Zealand, South Africa, Singapore, Hong Kong and many more.
- How much can I borrow?
This depends on your circumstances but one key factor we look at is your Debt to Income ratio. Ideally the sum total of the repayments you make on all your debts per month plus the proposed payments for the overseas mortgage you want should not exceed 35-40% of your net income. This factor tends to be the biggest constraint on borrowers raising an overseas mortgage.
- How will I manage the language and cultural issues?
We will ensure you have access to English-speaking experts in the country you are intending to buy in.
- Will my UK credit record affect the success of my application?
Yes, it is a key factor in the eligibility criteria.
- How much will it cost to arrange my mortgage?
The fee to help prepare your mortgage varies from country to country but will be made clear to you in advance.
To learn more or to apply for a Overseas Mortgages please either ﬁll in the call back form at the top of this page or call us on 01494 410 125 and we'll walk you through your options at no cost or obligation.