Mortgage products for non-residents
Just about all of the Portuguese high street banks will now lend to non residents of Portugal.
It is advisable to use a broker as not all the banks have someone that speaks good English plus they will know the market and get the best product available for you. It can be a slow process compared to the UK so allow plenty of time to get your application in.
|Property Purchase||Mortgage Transfers|
|Off Shore Finance||Equity Release|
|Commercial Loans||Bridging Finance|
|Up to 70% Loan to Value (LTV)||Term up to 50 years|
|Up to 80 years of age||No early redemption penalties|
|Fixed or Variable rates||Valuation not purchase price borrowing|
Building Insurance is always mandatory with the banks and will need to be in place by completion.
Life insurance is always recommended and we can arrange this at the same time as arranging the mortgage if required but it is optional unless the property is your primary residence and then it is usually mandatory.
Bank Account this has to be in place in order to service the payments to the mortgage.
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 ideally not 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.
Borrowing in the UK = Monthly Mortgage £425pm
Car Loan £130 pm
Proposed new mortgage £350
Total borrowing commitment = £905 divided by £3,000 = 30% and therefore within guidelines.
- Portuguese Tax Number (Número Fiscal de Contribuinte);
- Copy of passport(s);
- Last three months personal bank statements – including Loans/Investments/salary acc;
- Proof of address (e.g.: utility bill, but not mobile phone);
- Credit reference report; (e.g. www.Experian.co.uk / www.icb.ie)
- Latest mortgage statement;
- Bank reference letter.
- Application Bank Forms (attached)
- Copy of last year’s income tax declaration
- Employer’s reference confirming current employment length of service and gross annual salary
- Payslips for the last 3 months;
- Property Documents (Plans/ “Caderneta Predial” -Tittle Certificate/ Name and contact for valuation)
- Full Credit Report (with scoring) from one of this sites www.experian.co.uk ; www.equifax.co.uk; www.icb.ie
- 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
As a general rule we advise our client to budget approximately €1,100 plus tax (4%) for the total bank fees and 7 - 8% of the purchase price for ALL fees due when buying a property in Portugal.
Typical Mortgages charge £250 or €300 for services of Mortgage advisor however this is refunded to upon completion of the mortgage.
Bank Application/Arrangement Fee:
From €150 to 0.50% (& tax) of the loan amount depending upon which bank is chosen. Most of the banks will not charge if they are unable to make you a mortgage offer.
Bank Valuation Fee:
From €175 to €500 & tax. Most banks charge €175 & tax however this increases if you want the valuation done at the beginning of the proposal. Most mortgage approvals are given “subject to” the valuation being undertaken and therefore this is not done unless approval has been granted. In some circumstances, on new developments, the bank may have already done a valuation of the whole site and therefore a further valuation would not be necessary.
Bank Legal Fees:
The bank will need to use their own internal lawyers to undertake various works such as mortgage and outstanding debt searches against the property. This is included in our figure of €1,100 (& tax) above and makes up the remainder of the bank’s total fees.
Most lawyers / solicitors will charge between 1% - 2% of the purchase price of the property as their fee.
Taxes & Notary Fee:
Normally approximately 5% - 6% of the property purchase price and makes up the majority of the total 7- 8% mentioned above.
The government currently takes 0.60% of the mortgage amount from the clients’ bank account upon completion of the mortgage as stamp tax. This is in addition to the €1,100 (& tax) mentioned above.