Mortgages in Portugal: the advantages of getting pre-approved mortgage before you have found your new home

Having carried out a previous analysis of your financial profile allows you to adjust your house search in terms of value, typology and location, for example.

Photo by bruce mars on Unsplash
Photo by bruce mars on Unsplash
24 September 2020, Redaction

Buying property abroad can be a daunting experience. However, here at idealista, we are here to help you every step of the way when buying property in Portugal. When buying a property, it may seem a little strange to start with the mortgage, especially if you haven't found the property you are looking for. However, doing this can actually be a very clever strategy for those who don't want to waste time and is a process that can be started online. So, how can get a pre-approved loan from the bank in Portugal without having chosen your home and have no idea how much you will spend on buying the property? And why is this a good option? Let's have a look with the help of mortage experts.

The pre-approval of a home loan consists of analysing the client's financial profile, assessing their income, expenses and the level of risk associated, and depending on this calculation, the bank should be able to tell a client the loan amount for which they can get approval, as explained by UCI (the Real Estate Credit Union in Portugal). The result of this procedure is therefore a maximum ceiling, which reflects the amount of funding that the credit institution can finance, under certain conditions.

The usefulness of this preliminary analysis

  • You can define a price range for your property search 

It should be remembered that, currently, most banks and credit institutions in Portugal grant a maximum financing value of up to 90% of the value of the property. By knowing how much you can borrow, the client also becomes aware of the purchase value they can get, and avoids wasting time with options of houses that are not within their current financial capacity. Therefore, when starting your property search, you can already define a realistic range of values within your budget, with the relative peace of mind that your mortgage request will be approved.

  • It allows you to define the type of home you can buy 

Knowing the amount of financing that can be obtained in advance before you start your property search can help you define other criteria for your search. This includes other factors such as location, typology, square metres and finishes, for example. Knowing how much you have to go on is an excellent strategy to avoid wasting time on properties that you later can't buy or that can generate frustration during the buying process.

  • You get a more immediate response

Many deals don't go through because buyers, when they find a house they like, can't commit immediately and need to get approval for the value of the home loan first. In the meantime, another interested buyer comes along and takes the lead. Having a pre-approval guarantees that, respecting the approved conditions (such as the purchase value of the house), you get a loan up to that value, so if you find the right house, at the right price, you just have to close the deal.

  • This can speed up the mortgage process

Dealing with the process of finding the right mortage at a time when all you can think about is moving house can be somewhat stressful. By pre-approving the loan, the process becomes simpler and quicker in the latter stages, and in most cases you will even be able to move house sooner.

"At the end of the day, pre-approving a home loan can be a way to make home shopping more focused and effective, knowing from the start what you can count on in terms of financing and what kind of home you can buy. No time wasted, no misplaced expectations", summarises UCI.

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