Mortgages in Portugal: taking out extra products to lower the spread

When applying for a home loan in Portugal it is necessary to analyse whether, in terms of costs, it is worth contracting additional products which may reduce the base spread.

Photo by Anna Dziubinska on Unsplash
Photo by Anna Dziubinska on Unsplash
2 September 2020, Redaction

In recent years, banks in Portugal have been engaged in a real trade war, promising even lower spreads to attract new home loan customers or even persuade customers to move their mortgage, stealing them from the competition. But when applying for a mortgage in Portugal, there are several things you need to be aware of, such as additional products which may come with different conditions to what you're used to in other countries. In Portugal, it's important to pay attention to whether the mortgage you choose is just a basic spread or whether other products have also been taken out. On the one hand, these additional mortgage products can help to lower monthly instalments, however, they may also imply other costs. Let's have a look at the details for taking out a mortgage in Portugal.

When taking out a home loan it is completely normal to contract several spreads, that is to say, a base spread is established and another one is subsidised, if the client subscribes to certain products or services provided by the bank. These products help to reduce the monthly installments paid towards the property.

The most common products and services are life insurance and multi-risk insurance at a particular insurance company, credit cards and salary direct debits. It is often marketed that if one of these products is cancelled, then the contracted spread (and the benefits from the reduction) will automatically pass to the base spread and therefore, higher monthly installments.

But beware: "Although it is possible to reduce the mortgage spread by contracting of additional products, you should always analyse the cost of the respective products/services required, especially if you do not need them", according to the mortgage experts at idealista/créditohabitação. You may be saving on the one hand and spending on the other, while not using one of the products contracted for housing credit will also result in some sort of penalty.

In Portugal, the conditions advertised by banks almost always presuppose the contracting of additional products, but in fact, there are solutions on the market that do not require any kind of extra binding. 

"On this topic, as with others, the assistance of a credit intermediary is fundamental for you to be aware of the best market solutions for your particular case", the experts recommend.

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