Mortgage lenders in Portugal have generally been averse to following the negative Euribor rate, with interest rates for prime borrowers hovering between 3.25 percent and 5.25 percent, depending on the specifics of the loan, although lower mortgage rates may be offered in certain situations.
Types of Portuguese mortgages
Since the housing market collapse of 2008, Portuguese lenders have become more conservative on the types of mortgage products they offer. Interest-only products are usually only offered for new constructions, and typically only for a two-year term. Virtually all mortgages are principal plus interest loans, though banks offer both fixed and variable rate mortgages. Some variable-rate mortgages also allow for the same monthly payment or a capped payment and vary the length of the loan accordingly.
Most mortgages in Portugal run for 25 years, but you can get terms up to 30 years. Banks vary in the maximum allowed age of borrowers, which can limit the term a given institution will allow. Most banks will not offer a mortgage to individuals 70 years or more, but some will extend this limit to 80 years.
Banks underwrite by looking at a clients Debt vs. Income ratio. This means they will take your total borrowing commitments including any existing home mortgage, personal loans etc plus the new mortgage payment and calculate the total as a percentage of your Net monthly income. This ratio should not ideally exceed 40%.
More recently along with this calculation (and especially for those clients that exceed this percentage), they will also take into consideration the amount of actual disposable income remaining.
Example Mr. Smith = Net Monthly Salary €3000.
Monthly Mortgage €425pm
Monthly Car Installments € 130 pm
Proposed new mortgage €350
Total borrowing commitment = €905 divided by €3,000 % = 30% and therefore within guidelines.
MORTGAGE RELATED FEES:
Deed registration – 1 percent
Mortgage arrangement – 1 percent
Mortgage administration – 1 percent
Non-refundable commitment fee – around EUR 600
Survey and appraisal – EUR 500–800
Legal fees (optional) – at least EUR 1,000
Portuguese Tax Number (Número Fiscal de Contribuinte);
Copy of passport(s);
Last three months personal bank statements –
Proof of address (e.g.: utility bill, but not mobile phone);
Latest mortgage statement;
Application Bank Forms (attached)
Copy of last year’s income tax declaration
Payslips for the last 3 months;
Last year tax returns (P60 in the UK);
Last three months pay slips;
Reference letter from employer (simple letter stating how long you have been working with the company and your gross annual salary, bonus etc).
IF SELF - EMPLOYED
(hold a 20% or more share in a limited company)
Last year’s tax return;
Last three months business Bank statements;
3 Years of Company Profit & Loss and Balance Sheet.
Confirmation of pension income for the last 3 months
Copy of tenancy agreement for rental properties
Last 3 months statements showing rent received.
Copy of investment certificates.