Portuguese Mortgages

As Portugal is becoming an increasingly popular location for foreign property purchasers, it is not surprising that the Portuguese mortgage market is also developing at an impressively fast rate.

Portuguese Mortgage Terms

Get a Free Quote Introduction to Mortgage Terms
Portugal has a very established property market which, in turn, has driven the mortgage market within the country. Most high street banks and lenders offer a wide choice of mortgages with varying terms and conditions to suit a wide range of borrowers.

Mortgage Eligibility
One key difference between the UK and Portuguese mortgage market is that there are national rules laid down, in Portugal, regarding who can borrow as well as how much, which at least offers a degree of uniformity across all providers.

If the Portuguese terms are not suitable for a UK borrower, it is worth bearing in mind that many UK banks are now prepared to offer lending facilities on Portuguese properties. Indeed, this can be a preferred option for those who wish to maintain their financing in the UK.

More Detailed Terms and Conditions
The vast majority of lenders, whether they are Portuguese or UK-based, will not consider the types of properties that are common in the more rural parts of Portugal. This type of property is usually known as ¡¥rustic¡¦.

Conversely, most lenders will consider off-plan property, land and even remortgages as security for the lending, offering a large degree of flexibility for investors.

In most cases, lenders are prepared to offer around 70 percent of the valuation price. In some cases, however, this might be extended to 80 or even 90 percent, by personal negotiations. With land, it is rare to be able to obtain more than 40 percent of the valuation in the form of a mortgage.

Invariably, there are redemption fees that become payable if a mortgage is redeemed early. These fees are far more common in Portugal and, therefore, should be understood before entering into the agreement.

Tax Costs
When calculating the amount of mortgage that is affordable, taxation should be taken into account, as it can make a serious inroad into projected income. When property is generating an income, in Portugal, a UK resident has the option of paying tax in the UK, rather than in Portugal, due to a double taxation treaty that exists between the countries. This means that, under UK tax rules, any interest that is paid on the mortgage can be offset against any rental profits before being taxed, a real benefit for UK tax payers!

Summary
Bullet Point For those who do not want to enter into a mortgage agreement with a Portuguese lender, there is no shortage of UK lenders prepared to finance a property purchase in Portugal;
Bullet Point the total amount of finance available can be as much as 90 percent of purchase price;
Bullet Point bear in mind that there are often large redemption penalties with Portuguese mortgages which need to be understood in advance of signing the mortgage deed.

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