Most people who buy a property borrow to finance the purchase, and repay the capital and interest over the term of a property mortgage. Finding the right property mortgage overseas can be complex, with lenders offering different types of products.

 

The savings you have accumulated and the level of property mortgage you qualify for are the main factors that will determine your price range. Savings will be needed to cover the down payment and closing costs.

 

The amount you can borrow is usually limited to three times your annual income if you are an individual buyer. For couples the limit is two and a half times the main income plus the second income. However, you may want to talk to several lenders as some differ in their interpretation of what can be included as income. Based on the financial information you provide, the lender will tell you what size of mortgage you qualify for and the price limit you can afford.

 

The easiest way to find out the size of the property mortgages you qualify for overseas is to apply for a mortgage and receive pre-approval in principle from a lender. You can do this by either dealing directly with the lender or dealing with a property mortgage broker. Either way the lender or the mortgage broker will help you with the process.

 

The following common questions should help you search for a property mortgage in Portugal:

 

How much can I borrow?

The amount you can borrow is usually limited to three times your annual income if you are an individual buyer. For couples the limit is two and a half times the main income plus the second income. However, you should talk to several banks as some differ in their interpretation of what can be included as income.

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What is the difference between the interest rate and APR?

Comparing mortgages on interest rates alone can be misleading, as it does not take account of fees or discounts in earlier years. The Annual Percentage Rate (APR) is the projected rate over the duration of the mortgage after taking the costs into account and is a more accurate comparison.

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What are my mortgage options?

There are several types of mortgages available and the most suitable one will depend on your personal circumstances.

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Variable rate mortgages

The monthly repayments are determined by current interest rates and will generally fluctuate in line with changes in the European Central Bank rate.

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Fixed rate mortgages

The monthly repayments are set for an agreed fixed term irrespective of changes to the European Central Bank rate. At the end of the fixed term the interest rate will revert to the variable rate.

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Discount rate mortgages

The interest rate is discounted for an agreed term, and at the end of the term reverts to the variable rate.

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Flexible mortgages

Allows the borrower the flexibility to increase repayments and reduce the mortgage without incurring charges. Borrowers will generally pay a higher interest rate for the flexibility.

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Interest only mortgages

The monthly repayments only cover interest, and no repayments are made on borrowings until the end of the mortgage term. The borrower will pay into an investment fund, such as an endowment policy, that will mature at the end of the mortgage term. The aim is for the investment funds to cover the borrowings.

 

Currency exchange - See how you could save thousands just by securing the currency exchange rate of your property purchase.

Costs of buying – An overview of the real costs involved when buying a property.

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“Your home is at risk if you do not keep up repayments on a mortgage or other loans secured on it.”

 

Disclaimer
The above information is provided as guidance only and does not form part of any contract. You must seek professional assistance before making any buying decision. Currency equivalents are indicative only and should be checked with your bank. All information is subject to alteration without prior notice.