Buying Guide

With many years of experience Somerset Mortgages provides an independent and comprehensive service to help you buy or re mortgage your property in Portugal. We work with all the Portuguese banks, the UK banks that operate in Portugal and a number of European investment banks. Working with so many banks allows us to offer you the best deal, whatever your circumstances.

We have a close working relationship with the banks in Portugal and due to the volume of business that we introduce, we are regularly able to offer lower interest rates and fees than you would normally be offered.

A step by step guide to buying a house in Portugal with a Portuguese Mortgage

1. Find out how much you are eligible to borrow by completing our online quotation request form.

2. Instruct Somerset Mortgages to apply for the mortgage on your behalf.

3. Go to Portugal and find a suitable property.

4. Obtain a Fiscal Number (No. de contribuiente) & open a Portuguese bank account.

5. While in Portugal, sign a sales agreement (Contrato de Promessa de Compra e Venda) & transfer the deposit with Somerset FX to secure the property.

6. Lender instructs valuation.

7. Arrange buildings insurance. This can be provided by Somerset Mortgages.

8. Lender issues a mortgage offer. The bank or Lawyer registers the deeds at the Land Registry.

9. Arrange monthly mortgage payments with Somerset FX Regular Payment Plan.

10. Completion.

What type of property can I get a mortgage on?

We can arrange mortgages for individuals or companies to buy main homes; second homes; rental or investment properties; off-plan properties and commercial properties. Equity release mortgages are available.

What currency will my mortgage be?

All Portuguese banks will provide mortgages in Euros, but we can also arrange mortgages in other currencies such as US Dollars, Sterling and Swiss Francs.

What is the maximum loan amount (LTV%)?

Depending on the valuation of the property, non-residents can borrow up to 80% for purchases and equity release. All mortgages are subject to income but some banks will also take rental income into consideration.

Lending Criteria

Lenders calculate financial commitments (loans and rent) including the requested mortgage, as a percentage of stable pre-tax income. As a general rule the ratio should not exceed one third, but obviously this depends on the figures involved as the higher the income the higher the debt ratio can be. In fact, most lenders try to apply their rules with common sense and look at the actual amount of disposable income, not just the percentage.

What is the minimum loan amount?

The minimum loan amount that Somerset Mortgages will consider is €100,000.

How long is the term of the mortgage?

The mortgage term can be from 5 - 30 years.

Do I need life assurance?

This is not mandatory, but recommended. Somerset Mortgages can help you arrange this at minimal cost.

Which mortgage types are available?

Both capital repayment and interest only mortgages are available for both purchase and equity release.

Interest rates

The interest rate will depend on the currency of the mortgage. For example, if a Euro mortgage was selected then the EURIBOR (European Interest Offered Rate) would apply, plus the bank's margin.

Buildings insurance

This must be in place before completion and the lender will require the policy to be assigned to the mortgage. Somerset Mortgages can provide you with a quote.

Bank account

You will be required to open a Portuguese bank account before completion. Somerset Mortgages can assist you with this at no additional cost, if required.

What timeframe is involved in securing the mortgage?

An Agreement in Principle can be obtained from a lender once all the requested documentation has been submitted. This takes approximately three working days. However, for loan amounts in excess of €750,000 this may take longer.

A minimum of six weeks should be allowed from application to completion.

Organising payment of your Portuguese mortgage

Please be aware that missing a monthly mortgage payment may have serious consequences and we therefore strongly advise participation in the Somerset FX Regular Payment Plan. This service gives you peace of mind in the knowledge that your Portuguese mortgage repayments will be met automatically each month.

Completion

Mortgage funds will be released by the lender to your Notary for completion of the purchase.

Fees and Taxes

• Somerset Mortgages charges a non refundable administration fee of £150 to prepare, package, facilitate and courier your mortgage application.
• Somerset FX does not charge a fee or commission.
• The Notaire will provide you with a breakdown of fees payable once a sales agreement has been signed. The Notaires fee will include Stamp or Transfer Duty and the Mortgage Registration Fee. You should allow 10% of the purchase price to cover these fees.
• The Bank's Arrangement Fee will generally very between €175 and 1% of the loan amount. Where possible we will negotiate on your behalf to reduce this.
• The estate agent commission will average 3%, but you should always confirm this.
• Mortgage Registration Fee varies from 1% - 2% to register the lenders charge against the property.
• Stamp or Transfer Duty - up to 8%.
• VAT - is 21%.