You can borrow more for your mortgage
Applying for a mortgage in Portugal as a foreigner
Portugal is still in the middle of the corona pandemic, but banks are still ready to fund property purchases. If you also consider the low interest rates, now could be the perfect time to buy a property in Portugal and finance it with a mortgage. To do this, it is important to understand how the application for a mortgage loan works in Portugal, especially if you are not from Portugal or if you are buying a property in Portugal for the first time. Regardless of whether you are based in Portugal or not, here we inform you about,as you are in Portugal as a foreignerCan apply for a mortgage.
Given the complexity of applying for a mortgage loan in general, and not just in Portugal, the help of a credit intermediary or mortgage broker is in great demand, explains Miguel Cabrita, who is in charge of the idealista / créditohabitação mortgage service in Portugal. "You save time contacting different banks, get answers from someone who specializes in the field, and save money, not only because the service is free, but because of the benefits that mortgage brokers offer," he adds added.
First of all, you need to check whether your current financial situation would allow you to take out a mortgage at all. To do this, you have to compare the mortgages on the marketto get the best financing for your needs. You will need to provide various documents, with the non-resident banks usually requiring some additional documentation, appraising the property and signing the deed of purchase.
Documents required for a mortgage application in Portugal
The documents required to analyze your mortgage application do not vary too much between banks. You should therefore expect to be asked for the following documents in good time if you based in Portugalare:
- ID card
- the last 3 pay slips
- Income tax assessment and proof of payment from the last year
- Bank statements for the last 3 months
- "Mapa de Responsabilidade de Crédito" from Banco do Portugal (list of all loans you currently have in Portugal)
If you are a resident of Portugal and you are paying your taxes in Portugal, you will need to provide the same documents as any Portuguese citizen.
If you are not based in Portugal, you will usually need to provide additional documentation, which may include:
- Portuguese tax number (NIF - here's how to get one)
- Copy of your passport
- Bank statements for the last 3 months (including other loans / investments / salaries)
- Proof of your current address (e.g. using an electricity bill)
- Reference letter from a bank in your country of residence
- Copy of last year's income tax return or proof of where you pay your taxes
- Letter of reference from the employer confirming the current length of service and gross annual salary
- the last 3 pay slips
- a full credit report with rating.
Note that a official translation into Portuguese is needed. Often the translations also have to be certified and provided with a Hague Apostille, which means additional costs. It is therefore best to check with the bank beforehand to find out which documents are required and whether certified translations and the apostille are required.
Choosing a bank
After you've sent your documents to the bank or hired a credit intermediary to do it for you, the banks that are willing to lend you money to buy your property will give you what is known as a mortgage pre-approval. This will allow you to better compare the terms and conditions offered by each bank and choose the best financing for your needs. Please note the following points:
- TAEG: This is the annual APR, which you can use to compare different mortgages as long as they have the same characteristics. H. same term, same loan amount and same repayment method.
- MTIC: This is the total amount payable and is another indicator that you should use when comparing different financing offers. It is the total amount you will pay over the life of the loan as it includes all costs (interest, commissions, taxes and other fees).
- Spread: The mortgage spread essentially refers to the profit the bank makes from borrowing money. More than just checking the spread, however, is what you need to do to lower the spread, as many banks offer to take out additional products to lower the spread.
Once you have selected your property and the bank that offers you the best terms, it is time to request a property valuation from the bank. This is where the first costs come to you.
At this point the bank will request the property appraisal from a specialized and independent appraiser who will prepare a report on the property's value. This rating is then used to know how much money the bank can lend you. In some cases, this valuation amount is higher than the purchase price, so some banks will offer you more money.
If the mortgage loan is approved and the rating is compliant, the approval letter will be issued. After that you have to wait at least seven days to sign the deed, as a cooling off period is guaranteed.
At this point, taxes are paid, namely IMT (real estate transfer tax) and stamp duty, which must be liquidated in order for the deed to be drawn up.
The clear definition of the whole process and also the help that you can get during the process determine the time between the first step and the completion of the mortgage. Depending on the case, applying for a mortgage loan in Portugal can take anywhere from 1 to 3 months.
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