Detailed information about mortgages in Portugal – who can apply? What are the costs? What types of mortgages are available? How long does it take to get mortgage approval? Get the answers to these questions and more from the in-house mortgage expert at Ideal Homes Portugal.

If you are looking to buy property in the Algarve or Portugal, applying for a mortgage is the usual route to financing the purchase. Investing in property is a big undertaking, even more so, if you are doing so as a foreigner. Correct and professional advice is vital and can help you make the right decisions and save you money.

We asked Nicholas Martins, a licensed mortgage broker from Ideal Homes Portugal to answer some of the questions buyers have when looking to finance their property purchase:

• What types of mortgages are available?
• Do you have to be a resident in Portugal to qualify?
• What are the steps required to apply for a mortgage?
• What are the Portuguese terms used when speaking about mortgages and what do they mean?
• Watch the video and read the article for in-depth information.

Ideal Homes Portugal is a leading real estate agency operating across Portugal but with particular emphasis on the Algarve. The agency has an in-house and fully licensed mortgage brokerage service, licensed by the Bank of Portugal - Ideal Mortgages. Their mortgage service is completely free of charge to their mortgage clients.  
Nicholas Martins: At ideal homes, we have a bilingual mortgage team, speaking English and Portuguese. We're here to help people that are looking for mortgages, not just by purchasing through Ideal Homes Portugal but for anybody that's looking for a mortgage, all across Portugal. There are no costs whatsoever for brokerage fees. Our mortgage service is a free service for the clients, and we're here to help you.


Q.  WHY IS INVESTING IN PROPERTY IN PORTUGAL A GOOD IDEA?
So, in my personal opinion, Portugal is a fantastic place to invest and to live in. I'm from the UK, and I've been living here in Portugal for the past 20 years. And if you look at, for example, the Ideal Homes team, most of them are from the UK or from South Africa, from the States or from Canada. And everybody has relocated and is living in Portugal at the moment and have set up their lives here.
Portugal is a gateway to Europe. By being in Portugal, in Lisbon, Porto, in Faro, you have access to all the major cities of Europe. Portugal is a safe country as well. The lifestyle in Portugal is fantastic - the culture and the cuisine. Portuguese food is lovely. Living in Portugal is not as expensive as it is elsewhere. For example, about 90% of our clients are from the States or from the UK. The cost of living in Portugal, the Portuguese lifestyle, it's much cheaper than in the US or the UK.
The property market here in Portugal, and particularly in the Algarve, is fantastic. Property value has increased and is increasing between 6% to 9% every year, and interest rates are lower in Portugal than for example in the UK and the US. Portugal at this moment is the right place to invest.

Q. WHAT SCENARIOS DO YOU SEE AMONG PEOPLE APPLYING FOR MORTGAGES IN PORTUGAL?
Normally two scenarios, this independent of which country the clients are coming from. We have scenario number one where the client already has a property chosen, has a property in mind. They have made an offer and they come to us for seeking a mortgage against that property. The client needs 70% finance, 80% finance &nb...l let you know your budget for a property and the maximum amount you can borrow.

Q. WHAT ARE THE COSTS OF GETTING A MORTGAGE IN PORTUGAL? DO YOU CHARGE FOR YOUR SERVICES?
Ideal homes brokerage fee mortgage fee does not exist. it's a free service to all our clients.
But clients do have to be aware of associated costs. The bank will levy fees. Besides the 20 or 30% deposit that the client will have to put down as minimum which is normal, the client should check if all the costs and fees are included or not in the deposit. The client should be looking always at having around about 7% of the purchase price for all the taxes, stamp duties, notary charges, registers, etc. In Spain, for example, you'll be looking between 10 and 12% of the purchase price for the property for the expenses, here in Portugal, we're looking at around 7% of the purchase price for the expenses. So the client should be always looking at 20 or 30% deposit plus another 7% on top.

Q: IS LIFE INSURANCE A REQUIREMENT WHEN GETTING A MORTGAGE?
This is very important and sometimes clients do not realize this. Some banks do have life insurance as mandatory, others do not. This all depends on which bank, which mortgage lender provider, we'll be looking at. But in general, if a client is looking for an 80% mortgage, the bank will oblige the client to subscribe to life insurance. We do have some lenders here that if you opt for 70% finance, they will not oblige you to subscribe to life insurance.
Regarding life insurance - this is very important. The client can opt for life insurance from the bank. However, many buyers are 45 years of age plus. And the payments on the life insurance are going to be very, very expensive. We have agreements with independent insurance companies that will allow the client to subscribe life insurance, but probably paying half of the monthly installment compared to the rate with the bank. And these insurances will be accepted by the bank.
So, in summary, the client has a choice if he does not want to take life insurance at 70% Finance. At 80% Finance, he will have to take life insurance. But we can help out afterwards, indicating to them independent mortgage insurance companies that will cut their monthly payments down regarding the life insurance.
Q. CAN YOU EXPLAIN SOME OF THE PORTUGUESE TERMS USED WHEN DISCUSSING MORTGAGES? 
So basically, regarding the mortgage criteria, there are two main terms. First of all, it's the percentage of finance called LTV - the loan to value. It's the finance that the client is requesting against the property value, the purchase price of the property.
The second criteira is the debt-to-income ratio. This is a very important factor and is a 90% guideline if you will get a mortgage in Portugal or not. This debt-to-income ratio cannot exceed 35%. Banks call this Taxa de Esforço or TE. So we have LTV - loan to value and TE – taxa de esforço, which is the debt to income ratio.

When looking at a simulation, interest rates in Portugal will appear as TAN – Taxa Annual Nominal.
You will see the base rates on a simulation, which is called Euribor, you will see a spread which is the bank's margin below, and you will see TAN below this, which is interest rate - the Euribor plus the spreads.

Then we have the TAEG, which is the total cost of the mortgage that appears on the simulation. This is made up by the interest rates, plus any additional bank products - insurances, credit cards, payments into account etc. This will affect the total cost of your mortgage and will appear as the TAEG.

Then finally, we have the MTIC which is the total cost in figures of the mortgage for the client. The client can see how much a 200,000 Euro mortgage will it have cost by the end.
And when you compare simulations from each bank, don't just look at the spreads. But look at the MTIC because sometimes there can be lower spreads from a certain lender, but then the mortgage costs will be higher because of all the background products that the bank adds into the deal.

Q. IF YOU COULD GIVE ONE PIECE OF ADVICE TO SOMEONE LOOKING FOR A MORTGAGE WHAT WOULD IT BE?
It is one thing to buy property in your own country. It is quite another to buy property abroad. And if you're not familiar with the process of purchasing a property and getting a mortgage in that specific country, sometimes bad things can happen. People can be misled, people can be given the wrong information.

I would advise working with a certified mortgage company, a certified mortgage broker. A broker has to be certified by the Bank of Portugal. The company website, or on the office door, if it is licensed by the Bank of Portugal as a mortgage provider, mortgage broker, it has to say that. Only licensed mortgage brokers, licensed by the Bank of Portugal are authorized to give professional advice and take care of mortgage applications for the clients here.

At Ideal Homes Portugal, this is the case – we are licensed by the Bank of Portugal. I myself have more than 16 years of experience in mortgages. We have a full professional mortgage team to help you.

And besides this, we give you free advice, for example, on life insurance, at no cost whatsoever for you. If you do not have a lawyer, we work with fantastic professional lawyers, which we can recommend for you. Regarding currency exchange, we work very closely with Moving Currency, led by Claire - the best person to turn to, if you're looking to send currency over from the US, UK to Portugal. She can quote you better rates than any bank. Our rentals team can assist you after you have bought the property with renting it out and managing your property.

We have a full-service package for clients. Working with Ideal Homes Portugal you're choosing the full package that will guide you with 100% professionalism, from the property search, the mortgage application, lawyers, tax advice, life insurance, after-sales team and the rentals team. In my opinion, this is a fantastic service for the client.    

• Find out more about Ideal Homes Mortgages
• contact the mortgage team