Mortgages in Portugal

High street lenders regularly lend to Portuguese non-residents, but these are generally for middle-market property purchases. For high-value Portuguese property, domestic retail lenders often offer packages that are too standardised or inflexible to give you the best rate, especially if you have an unusual situation.

If you are buying a luxury property as a non-resident, mortgages in Portugal can be complex.

Working alongside a partner like Enness will help you navigate lenders and secure the best property finance. International lenders are often used to more complex borrowers or those with global assets, worldwide income streams and unusual backgrounds. They are usually keen to lend to high-net-worth individuals buying in the country. As a result, Enness has extensive experience securing mortgages in Portugal for non-residents. With a track record of securing high-value mortgages all over Portugal, you will also benefit from your broker's familiarity with the country’s luxury property market. Enness’ team are also well-known to the key players that operate in prime locations.

When it comes to the granular details of how to get a mortgage in Portugal, Enness will operate in a way that brings you the best deal as fast as possible. Your broker will start by exploring your needs and the kind of property you want to buy. Mortgages in Portugal for non-residents can be complex – especially at the top end of the market. Therefore, it’s always advisable to start exploring mortgages early. Ideally, you will approach Enness before you start your property search, and your broker will look at negotiating in principle offers for you. Armed with these offers, you will have a clearer idea of financing and what you will be able to buy. Especially if you are looking at ultra-prime real estate, in principle property financing offers can bring some welcome peace of mind to the search process as you have a benchmark of what you can borrow.

While getting in principle offers ahead of time is the "ideal" scenario, let’s be realistic: life happens! Sometimes you will already have found a property you have fallen in love with or sourced the perfect investment property before you have thought about financing. In these situations, Enness will also be able to help you. Your broker will be able to work exceptionally quickly and can negotiate mortgages in Portugal very fast.

Regardless of where you are on your buying journey, before Enness approaches lenders on your behalf, your broker will work closely with you to understand your requirements for your mortgage in Portugal. Alongside your broker, you will cover:

• How much you want to borrow, and for how long
• If you are open to placing assets under management with lenders
• If you are looking to apply to Portugal’s Golden Visa scheme
• How liquid you are
• Your income
• What other assets you have, and their location

The amount that you can borrow will depend on your circumstances and financial background. Portugal’s mainstream lenders generally offer loan-to-value ratios of 60-70% for non-residents. This said, your income and how much your mortgage will cost in comparison will be carefully analyzed. Portuguese lenders will want you to stay very firmly within standard affordability guidelines – these will vary from lender to lender. It’s for this reason that if you are a high-net-worth individual, you will find that hand-built mortgage vehicles are usually a better fit than deals from Portuguese retail banks. Anyone with a situation that deviates from anything "plain vanilla" will struggle with getting a mortgage from a Portuguese lender.

Enness can negotiate the best rates and terms individually for you and match these to your requirements. The mortgages in Portugal offered by international banks and alternative lenders are often very attractive. However, rates and terms will depend on your background and circumstances; Enness will be able to help you borrow significantly more than the standard 60% LTV, even if you are entering into a high-value property transaction.

Enness works with more than 500 lenders and has independent access to all the parties who offer the most competitive mortgages in Portugal for non-residents. Your broker will structure your mortgage funding around your situation, taking into account your global assets and cash flow. In some cases, putting assets under management with private banks can secure the most advantageous mortgages. If this is likely to be the case for you, your broker will explore the option with you and help you decide if this is a route you wish to take. Any property finance Enness secures for you from international lenders will typically surpass domestic offers from Portugal’s local lenders by a significant margin.

The Portuguese financial sector was hit hard by the financial crash of 2008, and more than a decade on, this still affects how lenders approach mortgages in Portugal for non-residents. Back in 2008 and 2009, government debt spiralled, and the country experienced an unprecedented mortgage crisis, followed by significant austerity.

Domestic lenders changed their attitudes, and as a result, mortgages in Portugal for non-residents became less straightforward. Principally, lenders will want to make sure you won’t default on the loan. As a result, they will look closely at your financial situation, focusing on your income and expenditure. If you have regular income, Portuguese lenders are usually placated and will feel comfortable lending, provided the rest of your application is also on solid footing.

That said, mortgages in Portugal for non-residents can get tricky if you are buying a high-value property, if you have a situation that’s not "standard," or if your profile doesn’t match Portuguese lenders’ (often limited) risk appetite. In practice, this can be if you have high expenditure, if the bank views you as having "low" income (even if you have significant assets), if you have illiquid assets, if you are an entrepreneur with substantial but sometimes unpredictable income, and so on. Portuguese lenders are generally risk-averse, although propensity to lend will vary from lender to lender.

It’s for this reason that mortgages in Portugal can be so tricky for foreigners. It’s hard to know what part of your background banks will like – a situation that is acceptable for one bank may not meet the lending criteria for another. Even high-net-worth individuals will fall foul of the system if something like your income doesn’t meet the bank’s risk screening process.

While some Portuguese retail banks can offer competitive property finance, many will not, or will offer the best deals to the middle market, where they are most comfortable lending. Getting a mortgage in Portugal as a foreigner can have pitfalls, and it’s easy to have a spanner thrown in the works and a deal by what would be a very minor point of attention somewhere like the UK.

The rates domestic banks offer you generally sits at around 60%-70% LTV, and tend to work on margins of between 1.7% and 2.5% depending on your financial situation. If you are buying luxury property, the best mortgages in Portugal for non-residents generally come from private banks and niche lenders who offer international property finance. The more you plan to spend on your Portuguese property and the more complex your situation, the more likely you are to benefit from a deal that’s built around you and is negotiated to take your background, assets and cash flow into consideration.

Portugal has one of Europe’s more liberal approaches to foreign home ownership, and there are no restrictions that act as barriers to purchasing real estate in the country.

Portugal has long been a popular destination for European property investors, but back in 2012, the Portuguese government made buying a house in Portugal as a foreigner even more attractive. Portugal’s Golden Visa” scheme was launched, entitling non-EU/EEA citizens to receive a special residence permit. The scheme was introduced at least partially to kick-start foreign investment in the country and help counterbalance the country’s economic downturn.

Under the Golden Visa scheme, buying a house in Portugal as a foreigner from non-EEA countries became much easier. After investing at least €500,000 in property, applicants (including dependent children) receive a Portuguese residency permit for five years. The residency entitles Golden Visa holders to free movement around the EU. After six years, holders can apply for Portuguese citizenship. The scheme is – naturally – popular with Brazilians, given the cultural and linguistic similarities between the two countries. American, Chinese, Russian and South African investors have also been prominent applicants for the scheme. With Britain no longer part of the EU, there has been significant interest from UK citizens, too.

The program was very successful, and coastal locations quickly saw an influx of foreign investment. As of 2022, to be eligible for Portugal’s Golden Visa scheme, property will need to be bought in "low density" regions. These will include Madeira and the Azores but can otherwise be considered the non-coastal regions of Portugal.

Portugal also launched a "light" version of the visa program, which allows a residence permit through a property investment of €350,000. To qualify, the property must need renovation, and you will need to have this undertaken to benefit from the scheme. Again, from 2022, qualifying properties will need to be in Madeira, the Azores, and low-density areas, i.e., non-coastal regions.

Buying a house in Portugal as a foreigner is relatively easy, far more than in other European countries. Retaining expert legal advice is obviously a must, but by and large, you are likely to find the experience of buying property relatively straightforward. The Portuguese government wants to continue to draw foreign investment to the country and overcomplicating the process for foreign investors simply wouldn’t serve their purpose. Mortgages in Portugal can be a little trickier, however, especially if you are purchasing at the top end of the market or if you are not from the EEA region. Enness can help anyone thinking of buying a house in Portugal as a foreigner to secure property finance, regardless of your nationality, residence, or background. Depending on your situation, Portugal’s domestic lenders may not have the capacity to let you borrow, but rest assured, Enness will be able to secure competitive mortgage finance for you.

If you are buying a house in Portugal as a foreigner, you will also want to consider fiscal implications – both locally and how they will affect you globally. It’s helpful to note that at the same time as introducing the golden visa, the Portuguese government also announced a non-habitual tax resident (NHR) scheme. This was used as a means of attracting skilled workers to Portugal, often on large salaries, to help support the economy and investment in the country. The main elements of the scheme include eligible applicants only pay reduced tax (a 20% flat rate) for their first decade as a resident. There are also some tax exemptions of income from foreign sources.

Mortgages in Portugal for non-residents also need to be planned in a way that is most efficient for you from a structuring perspective and consider your international connections. Enness will arrange property finance that is both tax-efficient and cost-efficient wherever possible. Your broker will also understand the Portuguese tax system and consider legal and regulatory factors alongside your advisors and other specialists. Enness’ exclusive access to more than 500 lenders will allow your broker to create a mortgage vehicle structured around your unique situation. With Enness’ help, getting a mortgage in Portugal as a foreigner will be fast, efficient, and you will enjoy the very best rates and terms.