Are you looking to purchase a property in Portugal but aren’t sure where to start when it comes to getting a mortgage? Well, you’ve come to the right place!
In this blog, we’ll be examining seven effective ways to help you secure a mortgage in Portugal with as little stress as possible. We’ll be covering everything from becoming knowledgeable about the Portuguese mortgage industry to calculating how much you can borrow. By having these essential tips at your disposal, you will have a better chance of finding the best mortgage for you in Portugal.
Check your credit score
When applying for a mortgage in Portugal, it is important to check your credit score before you start the process. Knowing your credit score can help you determine what kind of loan and interest rate you will be able to get, as well as how much you can afford in terms of property in Portugal. A good credit score can also help you to qualify for certain mortgages and loan programs that may be available.
It is important to review your credit report from all three credit bureaus. These are Equifax, Experian, and TransUnion, before applying for a mortgage. Prior to submitting your application, take a moment to review it for any mistakes or discrepancies that need to be addressed.
Get pre-approved
To begin your journey in finding the right property in Portugal, getting pre-approved for a mortgage is an advantageous step to take. Pre-approval means that a lender has evaluated your financial situation and determined how much you can borrow for a mortgage. This will help you narrow down your search. Also, to make sure that the property you are interested in is within your budget.
When applying for pre-approval, it is important to provide detailed information about your financial history and current situation. You will need to provide proof of income, such as payslips and tax returns, as well as bank statements, proof of assets and liabilities, and other relevant documents. The lender will then use this information to assess your ability to repay the loan and determine the amount they are willing to lend you.
When seeking a property in Portugal, obtaining pre-approval is an ideal approach to estimate what type of mortgage you would qualify for. Additionally, demonstrating to prospective sellers that you are committed to buying a house may give you an advantage over other buyers who have not yet been accepted.
Know how much you can afford
Consider a fixed-rate mortgage
If you are looking to get a mortgage in Portugal, you may want to consider a fixed-rate mortgage. A fixed-rate mortgage is a type of loan in which the interest rate is set for a specific period of time. It does not change throughout the duration of the loan. This type of loan can provide stability and predictability, allowing you to budget accurately and make long-term financial plans. The interest rates offered on fixed-rate mortgages in Portugal can be competitive, so it is worth shopping around to find the best deal.
One of the advantages of a fixed-rate mortgage when buying property in Portugal is that it provides protection against fluctuating exchange rates. When borrowing in a foreign currency, such as the Euro, a fixed-rate loan can protect against any adverse changes in exchange rates. Additionally, this type of loan will provide certainty over monthly payments and therefore provide more stability when managing your finances.
Before committing to a fixed-rate mortgage in Portugal, you should evaluate your financial goals and objectives. If you’re planning on living in Portugal long–term, this could be the best option for you. However, if you plan to refinance or relocate, a variable rate could better suit your needs. Additionally, you must also weigh any fees related to the loan, and assess different lenders to find the most suitable deal.
Shop around
When it comes to getting a mortgage in Portugal, it is important to shop around. There are many lenders available offering different types of mortgages and different terms. Property prices in Portugal vary greatly depending on the region and you should take the time to explore different options. Make sure to compare interest rates and fees charged by different lenders. This will ensure you get the best deal for your needs. Consider online lenders as well as traditional banks and building societies. Make sure to ask questions and make sure you understand all of the terms before committing to a particular lender.
Understand the fees involved
When it comes to getting a mortgage in Portugal, there are a number of fees you will need to consider. One of the first fees is the property registration fee, which is charged when you purchase the property in Portugal. This is a one-off fee and is usually around 1% of the purchase price of the property. Additionally, you will also need to factor in the Notary fees. These can range from 0.5%-1% depending on the property’s location and size.
When taking out a loan, you should consider a required bank deposit. This amount varies from 10–25%, depending on your credit rating and the size of the loan. Additionally, you should factor in legal fees, which may add up to 2% of the purchase price, as well as a mortgage application fee of anywhere between €500 and €2,000, depending on the bank.
Finally, it is important to remember that you may be liable for local taxes. These are taxes such as council tax, water rates, rubbish collection fees and insurance. Make sure you factor all of these costs into your budget before making an offer on any property in Portugal.
Hire a professional
When it comes to getting a mortgage in Portugal, you may want to hire professionals to help you navigate the process. RHJ Law can assist you with everything from figuring out your budget to getting yourself on the property ladder. Wether it’s for the first time or not!
If you want to get started with your property journey, why not contact us today! Alternatively, read more about property by reading our ‘Estates’ blogs.
