Mortgages

Here at PortugalProperty.com™ we would like to give those not too familiar mortgages some general information.

TYPES OF MORTGAGES:

There are different types of mortgages and we hope to provide you with a little extra knowledge.

Interest Only Mortgages:

This type of mortgage, is where you only pay interest on the loan amount, and do not repay any of the capital back. During the length of the mortgage only the interest will be paid so at the end of the mortgage term the amount borrowed will have to be paid back in full. Your monthly repayments are a lot lower than a standard mortgage because you are not paying any of the mortgage equity back. You have more freedom to invest in possibly more investments/property purchases and can intern increase the potential return of your investments. However remember at the end of your mortgage term, you will have to pay back the loan amount in full.
 

Repayment Mortgages:

Standard mortgage, where the mortgage payments, repay some of the capital borrow, plus the interest progressively over the term of the mortgage. Come the end of the mortgage, you will have paid off your mortgage dept if you take a repayment mortgage.
 

Variable Mortgage:

This is the most common mortgage taken in the UK. The mortgage interest rate can go up or down throughout the term of the mortgage, following the Bank of England’s base rate. If the interest rates go down, your mortgage payments will also go down. The same, can be said if the Bank of England’s base rate go’s up so will your mortgage payment. Being the most common type of mortgage and thus the most competitive, it may be the case that they also work out to be the cheapest mortgage.
 

Fixed Rate Mortgage:

Very common mortgage, and is exactly as the name suggests. A mortgage is taken for a certain amount of years and the repayment levels will be fixed throughout the mortgage. If the bank of England’s Base rate goes up or down your mortgage rate will remain the same. A very good mortgage if you want to be able to budget.
 

Capped Mortgages:

This type of mortgage is a combination of a variable mortgage and a fixed mortgage. If the mortgage base rate rises, the mortgage rate won’t go beyond a certain level as it is capped. If the base rate falls you will however be able to benefit from the drop in the mortgage rate. This mortgage allows for you to budget as you know what your maximum mortgage payments can be due to the cap, but a lender is likely to charge a premium for offering this type of mortgage.
 

Self Certification Mortgage:

When a person who is looking to take a mortgage but cannot prove their income, they will apply for a self certification mortgage. The borrower will state what their income is going to be and the mortgage dealer will then borrow an amount based on that amount. The Mortgage dealer will want to see proof of bank accounts and some evidence to back up the borrowers “likely income”. Due to the fact that there is more risk involved to the mortgage dealer when offering this type of mortgage, the mortgage itself will often attract higher interest rate. It is also likely that the borrower will have to pay a bigger deposit. The higher the deposit put down, the more likely the interest rate offered will be more competitive in comparison to a normal mortgage.
 

Buy to Let Mortgages:

The purpose of a buy to let mortgage is for when you buy a property with a view to then renting it out to private tenants. Many investors in property in Portugal take buy to let mortgages. Hopefully and depending on the property you buy in Portugal, the monthly income is higher than the mortgage payments and costs.
 

Click here for info on Mortagage rates in Portugal & Mortgages Products For Non-Residents or here for our mortgage document checklist.