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International Mortgages
Portuguese mortgages - How to improve your chances of getting approved
Updated: Friday 23 March, 2012
By Martin Fagan
Give yourself the best chance of being approved for a mortgage in Portugal with our top tips.
Whether you’re tempted by the endless sandy beaches, golfing opportunities on the Algarve or the buzzing nightlife of Lisbon, if you’re considering buying a property in Portugal there is a lot to think about.
Our top tips are designed to help you get approved for the best Portuguese mortgage deal and ensure the mortgage process runs as smoothly as possible.
(If you would like an introduction to Portuguese mortgages, check out Portuguese mortgages: A beginner’s guide)
- 1. Work out what you can afford
- 2. Boost your deposit
- 3. Have your documents ready
- 4. Get a quote in advance
- 5. Add up the extra costs
- 6. Allow yourself time
- 7. Know how you will use the property
- 8. Use a mortgage broker
1. Work out what you can afford
The maximum loan-to-value ratio (LTV) for Portuguese mortgages is typically 80%, but lenders look carefully at affordability when deciding whether to offer you a mortgage. As a guideline, your existing outgoings and new mortgage repayments should not exceed 35% of your gross (before tax) income. Before you apply for a mortgage, you need to work out what you can realistically afford.
2. Boost your deposit
The bigger the deposit you can build up, the better chance you have of being approved for a Portuguese mortgage and the better deal you are likely to be eligible for. If you haven’t managed to build up much of a deposit yet, check out our guide to getting into the savings habit and check out our top tips on getting the best savings rates.
3. Have your documents ready
Portuguese mortgage lenders will want to see proof of your income and outgoings before they approve you for a mortgage. You can speed up the mortgage application process by ensuring you have the documents and details you need to hand, including proof of your identity and address, payslips, bank statements and, if applicable, details of the property you plan to buy.
4. Get a quote in advance
It’s a good idea to get a mortgage quote and an agreement in principle before you start looking for a property. Knowing what type of mortgage is available to you could have significant implications on the type and price bracket of property you choose.
5. Add up the extra costs
When assessing your finances to get a picture of how much you can afford to spend on your property in Portugal, remember that it’s not just the monthly mortgage repayments you need to think about. When working out the cost of your Portuguese property, you need to consider all additional costs including the valuation fee, the notary’s fee, the mortgage broker’s fee, the bank’s arrangement fee and completion costs, mortgage registration tax and the essential buildings insurance. Your mortgage broker should be able to help you evaluate these costs.
6. Allow yourself time
Getting a mortgage abroad can be a fairly lengthy process, so you need to ensure you plan ahead and give yourself plenty of time to sort out your mortgage. International mortgage brokers International Private Finance recommend that you allow a minimum of eight weeks from application to the lender to completion.
7. Know how you will use the property
Before you apply for a mortgage, you need to know clearly what the property will be used for. For example, if you plan to rent out the property, you will need to discuss with your mortgage broker the implications this will have on the type of mortgage you need.
8. Use a mortgage broker
Buying a property abroad and securing a good value mortgage can be a complicated process and the support and advice of a good mortgage broker can be invaluable. If you are thinking about buying a property in Portugal, you should consider using an international mortgage broker with lots of experience in the local market.
THINK CAREFULLY BEFORE SECURING ANY DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP
REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.