Raising Finance in Portugal

Loan to Values

Standard loan to values are up to 75% for non-resident mortgages in Portugal and are linked to the valuation of the property not the purchase price. IMS do however have access to 80% loan to value products, including interest only if required.

Most Portuguese mortgages whilst linked to a percentage of valuation cannot exceed the price declared on the Title Deeds.

Portuguese mortgage product ranges

Finance in Portugal is predominately linked to a variable rate and on a repayment basis. Portuguese variable rate products are generally linked to the variable Euribor (European Inter Bank Offered Rate) and your interest rate can be reviewed monthly, quarterly, half yearly or annually. This can differ from product to product.

IMS has access through banks in Portugal to mortgages offering both Interest only periods and standard repayment mortgages.

Equity Release and Re-mortgaging in Portugal

This process can be undertaken, but only through specialist lenders. Because of the legal process of securing a loan in Portugal it is more difficult and costly to make any changes to your Portuguese mortgage post completion. Raising funds against an unencumbered Portuguese property, releasing further funds, or changing the terms can incur further tax, bank, and notary costs.

In Portugal under the current legislation it is advisable to raise the maximum funding you require for your current and future needs, as any changes at a later date may not be possible and will be costly. Lender, product and rates need to be carefully selected to ensure they are the most suitable for your needs. Lender and product hopping, which is now standard practice in the UK, is not currently cost effective in Portugal.

Term

The standard mortgage terms in Portugal is between 25 and 30 years. This is dependent on age and the finance provider selected. Most Portuguese banks will look for the mortgage to be completed by age 80.

Costs

All banks in Portugal charge an arrangement fee for dealing with your mortgage in Portugal. Some Portuguese bank costs (valuation costs, registration and handling costs etc) are payable prior to completion. The remaining costs pertaining to the purchase including Notary fees, IMT and "Land registry" costs are deducted from your gross mortgage advance. It is not possible to add your costs to the Portuguese mortgage unless your valuation level allows you to. It is important to check you have accurately assessed and accounted for all expenses to ensure you are not left short of funds for completion day. We would suggest you allow at least 10% of the purchase price to cover your purchase and finance costs in Portugal in full and that you make sure you are made fully aware of the provision of costs for completion.

Currency

If you take a Portuguese mortgage with a Portuguese bank the capital provided and repayments will be in euros.

Underwriting Criteria

Mortgages in Portugal are only granted on a full status basis. It is unwise to allow yourself to be talked into submitting false documentation and you should avoid brokers who offer this service. A fraudulent application could put your Portuguese property and your deposits at risk if found to be so at a later date. Most Portuguese banks will assess your income net of tax and will want to see that the combined existing UK and new Portuguese monthly liabilities do not exceed 35% of your proven monthly net income. In general Portuguese banks will not take into account any projected rental income from your Portuguese property when assessing your application, unless this is in the form of a "Rental Guarantee" clause from a Developer in your purchase contract of a new properties.

Benefits of Raising Finance in Portugal

Competitive interest rates, and protection of your assets in the UK are some of the key benefits of borrowing in Portugal, all alternatives should however be understood and considered before making a final decision.

Standard Non Resident Document Requirements for Portuguese Mortgages

Employed Applicants

Last 4 months payslips

Last P60 �s

Last 3 months bank statements

Last annual statement for all current mortgages, loans etc

Copy of Passport

Self Employed

Last years Self assessment tax return

Accountants reference confirming net profit for the last 2 years

Previous 3 years audited accounts

3 months bank statements

Copy of passport

Proof of address

Some banks in Portugal providing Portuguese finance may require you to supply your credit file from the UK or may check your credit file direct. Any loans subsequently granted will not be registered on your credit file in the UK.