Things you should keep in mind before applying for a mortage in Portugal

Before granting a home loan, the bank will analyse several criteria. Experts say which ones are the most important and why.

Photo by Amol Tyagi on Unsplash
Photo by Amol Tyagi on Unsplash
6 October 2020, Redaction

If you're thinking of moving to Portugal and buying a home, then getting a mortgage will be close to the top of your list. It's a good idea to do lots of research online before taking this step, and working alongside a mortgage broker can be a good option, especially if you're not familiar with the system in Portugal. Asking for a home loan is a considerable responsibility, and it is not always easy to obtain this financing, at least if some fundamental requirements are not met. The bank will have to assess several criteria, including income and job stability, with factors such as age also playing their part. 

Taking out a mortgage is not as simple a subject as it can sometimes seem, so for this reason, we have prepared a list with a number of factors that you should take into account if you are thinking of applying for a mortgage in Portugal this year. 

Job stability

"It is desirable that you have at least one year's professional experience in a particular company (2 years if you are self-employed), as well as a continuous professional experience of at least 2 years", the experts from idealista's mortgage department, idealista/créditohabitação, explain.

Income level

When deciding on a home loan, the bank must ensure that the client does not belong to the risk group of non-repayment or late repayment of loans. The possible amount of financing and the interest rate depend on how much you earn, and ideally, loan payments should amount to around 30% of your monthly salary.

Age

The ideal age group to obtain a mortgage in Portugal is 25 to 55 years. The minimum age is 18 and the maximum age to complete the mortgage payment is 75. The limits may be different, depending on the specific bank or credit institution.

Confidence in the client

The limit of the amount requested from the bank may be higher in the event of a positive credit history. This can be the case if a person has previously used the financing services of a bank and at the same time has not had problems with loan repayments.

LTV: Loan-To-Value

LTV is the ratio between the value of the loan and the valuation of the property. "If you're going to apply for a home loan, you should know that no institution is going to lend you the full value of the house and that the less you ask for, the lower the risk to the bank, so there's a higher probability of approval," the experts also remind us.

On the recommendation of the Bank of Portugal (BoP), the LTV should not exceed 90%, so that banks do not exceed 80% of the loan in relation to the value of the valuation.

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