Buying Property in Portugal

Buying Property in Portugal

Can You Buy Property in Portugal as a Foreigner?

The short answer is YES! One of the most encouraging qualities of Portugal is that there are no restrictions for foreigners who want to buy a home in the country. Furthermore, the Portuguese government incentivizes foreigners to invest in real estate property in Portugal through the Golden Visa program. If you’re a non-EU citizen and you invest in property worth a certain value, you can qualify for a Golden Visa residence permit in Portugal. This permit allows you to live, work, and study in Portugal, and travel freely across the Schengen area. In five years, you can also qualify for permanent residence or citizenship in Portugal. In our guide, we’ll cover the market history, locations, and legal steps for buying a property in Portugal. 

Types of Property in Portugal

Portugal is a very well-developed country, and its real estate market is just as advanced. The apartments throughout Portugal range from studio apartments to five bedrooms or bigger. When buying property in Portugal, there are different terms that you need to know:

  • A Casa or a Moradia refers to a typical detached home. Some of those houses have surrounding amenities such as a backyard or a patio, and most of them have a wall around them with a front gate.
  • A Casa Geminada refers to a semi-detached house.
  • Condomínios or condos refer to individual apartment units that share common areas. These can be expensive, but they offer a higher standard of care and safety in return.
  • Quintas refer to classic rustic houses or farms. You can usually find those in the inland of the country, though some are in suburban areas.
  • Terreno means land. Some foreigners choose to buy land and build their own homes. If you choose to do so, you must first check with the city hall (Câmara Municipal) to ensure that the land is registered for habitation, not agricultural purposes.

What Is Required to Buy Real Estate in Portugal as a Foreigner?

To sign the sales contract, you’ll need to have a notary witness. You also might need a Portuguese tax number which you can get at any local tax office. You will also need the following documents:

Mortgages and Down Payments

It’s always smart to sort out your mortgage early in the buying process so you can know how much you can afford and work out the monthly payments. There are many things to consider when it comes to mortgages.

What Are the Lending Terms?

To boost the economy, many major Portuguese lenders happily provide mortgages to suitable individuals, including foreigners, who wish to invest in Portuguese property. Most banks provide loan terms for up to 50 years if you’re a resident. That number goes down to 30 years for non-residents. However, there is a maximum age upon maturity of the loan, which varies between 70 and 80, depending on the mortgage provider.

What About the Deposit or Down Payment?

Depending on the lender, the borrowing can start from 60 percent of the property value to 80 percent. Therefore, you’ll need a minimum deposit of 20 percent. You can choose from different types of mortgages, with variable or fixed rates as your options.

Variable Rate Mortgage

The European Central Bank (Euribor) sets a margin linked to the increase or decrease of the interest rates of a Portuguese variable rate mortgage. A panel of European banks set the rate daily, and it is, in general, an indicator of the rate that European banks will lend to each other. There is an early redemption penalty of 0.50 percent for a variable rate mortgage, which is the Bank of Portugal’s regulation.

Fixed-Rate Mortgage

The fixed-rate mortgage allows you to budget better as the rate will not increase for the duration of the fixed-rate period, which can change from 0 to 30 years. After that, your mortgage will immediately become a variable rate one, unless it’s specific in the agreement that the rate for the entire period of the loan. There is an early redemption penalty of 2 percent for a fixed-rate mortgage, which is the Bank of Portugal’s regulation.

How Do I Qualify for a Mortgage?

There are two criteria that the banks check out when processing your mortgage request: Your financial position and your property evaluation.

Financial Position

To assess your financial position, the bank will require proof of your income or earnings, such as:

  • Salary income
  • Income from investments
  • Pension income
  • Dividend payments
  • Rental income

The bank will assess each applicant’s net income; additionally, they will ask for information about any pre-existing debts and your employment history. This information is to assure the lender that you can make the monthly payment on your mortgage.

Property Evaluation

The bank will hire an engineer to evaluate the property you decided to purchase. The Portuguese banks currently lend between 60-80 percent of the property value.

Required Documents for Mortgage

There is a range of documents required to apply for a mortgage:

  • A copy of your Passport
  • A copy of the Portuguese Tax Number (NIF) 
  • Proof of address, for this, the recent utility bill works
  • Your credit report
  • Recent payslips
  • Recent bank statements
  • Your most recent tax return

Acquiring Home and Life Insurance

Home and life insurance are required by law in Portugal when applying for a mortgage loan.

Taxes and Fees

The main cost that you will have to pay is the IMT transfer tax. This tax varies vastly depending on your situation; it can go as high as 10 percent for non-residents in a tax haven, or as low as zero for those buying cheap property as a second home. It’s smart to discuss this with a professional to know what the costs will be like according to your situation. The agency fees are typically taken care of by the seller. But there are some fees and taxes that you may need to pay such as:

  • Imposto Municipal Sobre Transmissões (IMT) or the Property transfer tax: This tax depends on the cost of your home and will be higher if the property you’re buying is a second or third home.
  • The fees of the land registry and the notary: You pay these together, and they usually cost from 0.2 percent to 1.2 percent of the property value.
  • The Stamp Duty: This stands at 0.8 percent of the value of your home.

What Can We Do For You?

If you are looking to buy a property in Portugal, expert advice may save you time and money, bringing peace of mind along the process.

We act for the buyer so once you complete a brief form detailing your property preferences, we collaborate with a specialized real estate agent to find properties that match your criteria. We guide you through the entire property acquisition process, assisting with negotiations, securing the best price, and connecting you with a reliable mortgage broker if necessary.

We can help you understand the real estate market and hold your hand all along the property acquisition process in Portugal.

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