If you want buy a house in Portugal with a home loanwhile foreigner and non-resident in Portugal, the conditions may differ in some aspects of what is offered to residents.
In this article, we try to explain the conditions that a foreigner can have in a mortgage in Portugal and How does this process work in the country?.
Yes, as a foreigner, you can buy a house through credit, whether as a permanent home, holiday or investment property, anywhere in the country. Some conditions may differ for residents: foreigners and nationals.
You also don’t need to be working in Portugal. However, you always need obtain a Portuguese taxpayer number (Tax Identification Number – NIF), even if you buy a house in Portugal only as an investor. For this, you need to register with the local tax administration or the tax office, being necessary appoint a tax representative in the country while not residing in Portugal. And even if you don’t come to live in Portugal, you still need a legal tax representative in the country to buy the property.
Also read: Buying a house: costs, documents and taxes you should count on
Are the conditions different as a foreigner?
Housing credit for emigrants: How it works and what conditions it requires
As a non-resident in Portugal, banks can grant you the loan up to 80% of the property value. Unlike residents, to whom banks can lend between 80% and 90% of the home’s value.
Regarding the other conditions, they differ little compared to the conditions provided to local citizens in the housing loan.
what can be different is the percentage and term of financingbut it will depend on the local bank from which you apply for the loan.
Another factor that can still influence the risk decision is the continentality. In other words, there is more risk if you live on another continent than if you live in a European country.
If you experience difficulties in communicating with banks due to the terms used in Portugal regarding credit, consider a credit intermediarysuch as Doctor Finance, who will help you understand the conditions that are being proposed, so that you can also negotiate.
What documents do I need to present?
You documents you will need to submitso that you can apply for a home loan in Portugal as a foreigner, are as follows:
- Personal identification (passport);
- Personal identification number (NIF);
- Last three payslips;
- Current account statement for 6 months;
- Last income statement;
- Proof of work (employment contract, declaration of effectiveness).
Also read: Via Verde for Foreigners: How does Via Verde Visitors work?
How does home loans work in Portugal?
A home purchase process with housing credit in Portugal has start with property valuation that you want to buy.
After that, the financing amount that the bank lends is determined by the lower value between the acquisition and the valuation. That is, if the appraisal value is greater than the value at which the property is for sale, the bank lends the acquisition value. If the appraisal value is less than the purchase price of the property, the bank lends the appraisal value.
Being a credit for foreigners, the amount lent by the bank may be different than for nationals. In Portugal, banks usually lend up to 90% of the value of the property. As a foreigner, banks can lend you between 60% to 80%depending on the institution.
Regarding the financing terms of the property, the rules have changed recently, which have been shortened. Currently, if you are under 30 years old, you have a maximum term of 40 years to pay off the loan. If you are between 30 and 35 years old, the maximum period you can benefit from is 37 years. And if you are over 35 years old, you cannot exceed the maximum period of 35 years to settle the credit.
However, as a foreigner non-residentbanks restrict a customer to 30 years of financing term. If you are a resident, the sum of the financing term plus the age of the customer cannot exceed 75 to 80 years. That is, a 50-year-old client obtains maximum financing between 25 and 30 years. As for non-resident foreigners, even a 30-year-old customer can only get a maximum loan term of 30 years.
Mortgage loan rates in Portugal
In mortgage loans in Portugal, you are faced with the following interest rates: O spread and the index, which can be a fixed rate or a Euribor. So, when you go for a home loan, you must choose between a variable, fixed or mixed rate.
THE variable rate is revised according to the term chosen in Euribor. That is, if you opt for the 6-month Euribor, every 6 months the value is reviewed and may go up or down, depending on the evolution of the Euribor. This is the most common term, but you can also opt for a three- or 12-month Euribor.
Checklist of documents required for Housing Credit
Despite having a lower installment at first, the variable rate option is not so stable, as it can frequently change the amount you pay for your credit. That is, if you have a spread of 1% and the Euribor rises 1%, it will pay double the amount of interest.
In other words, a loan of 100 thousand euros, with 30 years, with a spread of 1% and indexed to Euribor for six months, pays around 303 euros per month. If Euribor (which is still negative) rises to 1%, the installment increases to around 370 euros. If you want to understand the impact of the Euribor variation on Housing Credit, use our simulator.
If you prefer a more stable solution, you can choose a mixed rate, where you pay a flat rate during an initial period – 5, 10 or 15 years, agreeing with the bank – and, then it switches to a variable rate.
There is also the possibility of contracting a credit at a fixed rate throughout the term of the contract. With one fixed rate, you will always pay the same per month, with no revisions. Still, it is important to realize that, initially, when contracting a fixed interest rate, you will pay a highest value than choosing a variable rate. However, it is a most stable and secure option.
Also read: Housing and Emigration Credit: what you should know