Getting A Mortgage In Portugal
Thinking of buying property in Portugal but unsure about getting a mortgage there
? Dont worry getting mortgage in Portugal is not rocket science. Here are a few things you need to know.
The basics
While its possible to get a 100% mortgage in Portugal, the most common maximum loan-to-value ratio is between 75% and 80%. Loan terms can go anywhere from 10 to a maximum of 30 years. The maximum age for completely repaying loans is 75 years old.
The loan currency will be in euros. We highlight this fact because, if your income is in pounds, you should be aware that you will be incurring a currency risk. Should anything cause the euro to strengthen against the pound, it will definitely affect the amount of money you will need to cover your Portuguese mortgage.
If this detail causes you some worry, then remember that you can also get a UK mortgage to pay for your Portuguese property. It will take a little bit more time and effort to do so, but at least you will be paying your mortgage in pounds, not euros.
Requirements
To get any mortgage, you will need to show proof of income that is, your salary plus investments or rental income you receive and also a list of your outgoings. Outgoings include any other mortgages you are paying, your personal loans, your rent, and other maintenance commitments.
Your monthly payments will be computed based on your income and your outgoings. The general rule is that your monthly payments plus your outgoings, when put together, should not be more than 35% of your gross income.
You will also need proof of resident and identity, plus details of any property you currently own.
Types of mortgage
Portugal mortgages come in two main types: variable-rate mortgage and fixed-rate mortgage.
A fixed-rate mortgage will give you the security of fixed repayments and will protect you from rate increases for a specific time duration. A variable-rate mortgage, on the other hand, often grants the borrower a lower starting interest rate.
Payment methods
With an interest-only mortgage, you will only pay monthly for the interest. The capital is paid only at the end of the mortgage term. To be allowed to use this payment method, you need to be able to show proof that you will indeed be able to afford this lump-sum capital payment at the end of the term.
The other payment method is the one most people are already familiar with the repayment mortgage, where your monthly payment includes both a fraction of the capital and the interest.
Extra costs
As with any big-item sale, the purchase of property comes with costs other than mortgage payments. When you buy property in Portugal, expect the following additional costs: the mortgage brokers fee, building insurance, mortgage registration tax, the banks completion costs, the banks arrangement fee, the notary fee, and the valuation fee. There may also be some cost involved in setting up the bank account from which your mortgage repayments will be made.
As you can see, getting a mortgage from Portugal is not so very different from getting a mortgage in the UK. So if you wish to buy property in Portugal, do not let the prospect of getting a mortgage deter you. If you consider the beauty of living in Portugal and its long-term value, youll realize the effort in getting the Portuguese mortgage is all worth it.
by: Robinson Jackson
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