Buying property in Portugal: ways to save money to buy a house

In 2022, many people are asking the same question: is buying property in Portugal a good investment? The current economic outlook shows that, in the long term, it is increasingly more advantageous to buy a house in Portugal compared to renting one. This is due to rising rental prices due to inflation and high demand. However, the option of buying property in Portugal for expats may prove more challenging in view of the prices on the property market. Tips for saving money to buy a house in Portugal: this is where your savings will play an important role as you will be required to have a considerable sum of money for a deposit and to get a mortgage in Portugal. Follow these 10 tips that could make all the difference when buying a house in Portugal and applying for a mortgage. 

Determine how much money you need to buy a house

If you are a resident in Portugal, most banks will require 20% of the value of the property as a deposit. Therefore, if you want to buy a house which is on the market for 150,000 euros, but the valuation carried out by the bank states the property is worth 140,000 euros, you will have to make a down payment of 28,000 euros (20% of 140,000 euros).

On top of this, you should also consider the taxes and fees that apply when buying property in Portugal.

When you buy a property in Portugal you will immediately have to pay the Municipal Tax on Property Transactions (IMT), Stamp Duty on the purchase and Stamp Duty on the mortgage. These costs will be calculated when you ask your bank for a simulation, since they will appear in the FINE (European Standardised Information Sheet) that will be given to you.

You can use the online mortgage simulators on the banks' websites to get an idea of what the costs will be, or consult idealista's mortgage simulator which will let you compare mortgage offers from several Portuguese banks. As mortgage brokers, idealista/créditohabitação will also be able to help you throughout the process of taking out a mortgage in Portugal and will be the link between you and the selected banks.

Plan your budget

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The first step to reaching the amount you need for a house deposit will be to draw up a household budget plan. To do this, you will need to analyse your expenses.

Organise your expenses into categories and frequency by dividing them between fixed expenses (which you have to pay every month) and extra expenses. It's also a good idea to factor in a cushion in case something unforeseen occurs.

Once you've categorised your expenses, do an analysis to see how much you spend in each area and see where you could cut back. Not only will you spend less, but you'll also save more money every month.

It's a good idea to do this planning with the help of a spreadsheet, for example, or even use one of the many apps that already exist for this type of planning.

Live below your means to save money

Another way to save money is to consider living below your means. While this isn't an ideal solution, it's short term and cutting down on at least some luxuries will help you reduce your expenses and consequently increase the amount of monthly savings.

Some ideas include selling the extra car if possible, cancel subscriptions to paid channels or apps, opt for cheaper brands or go on holiday in cheaper places, amongst others.

Change some habits

• Impulse buying: think if you really need that item or if you are just being the target of a consumerist impulse. Unsubscribe from newsletters that encourage consumption and turn your attention away from advertising that will persuade you to buy things you don't need.
• Tobacco and alcohol: these habits are very expensive. Considering, by way of example, a smoker who consumes one pack of cigarettes a day, at the end of the month they will have spent around 150 euros (around 5 euros per pack) and 1,800 euros in year.
• Eating out, takeaways and food delivery: ordering food out instead of making it at home is a type of behaviour has a significant impact on your budget. If we assume that the average meal for one person costs 15 euros, a couple dining out or ordering a takeaway/delivery once a week will spend around 120 euros a month. At the end of the year, this amounts to a sum of 1,440 euros that could easily have been added to savings. Equally, if you work n the office, consider taking food from home, so you avoid spending money on meals out.
• Constantly upgrading electronic items: constantly buying the latest model when your electronics (like mobile phone, TV and other gadgets) still work has a major impact on your budget. Conserve and use your equipment to its maximum lifespan.

Ask for a pay rise

This can be another way to increase your savings, considering that you will have an extra amount added to your salary. This often depends on the type of job you have and where you work, but if you have the opportunity, be prepared to discuss this topic with your boss. Be confident approaching the topic, display conviction and justify your progression.

Keep an eye on the job market

Changing jobs usually brings with it an improvement in salary conditions and benefits. If getting a pay rise in your current job is not possible, be prepared to explore the job market and look for better options. Keep your CV up to date and keep an eye out for offers. Set up an alert on the main job sites according to the keywords that are most relevant to your position and apply if it makes sense for you.

Save money on holidays

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Consider a holiday closer to your home area and/or in cheaper accommodation. And when you're on holidays, reduce the number of times you eat our in restaurants: consider self-catering accommodation where you can cook to save money.

Rent out your spare room

If you have an extra room at home that is being used only as storage, or simply isn't being used, you can take the opportunity to rent it out and increase your monthly income.

Automate your savings

Set an amount to be automatically transferred from your current account to your savings account on the day you receive your salary. This function is available via online banking and you can set it to suit you. You will always have the possibility to adjust the amount later on if you wish.

Set a spending limit

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After paying your fixed expenses like rent, school fees, water, electricity and other bills, it's a good idea to set a limit on your other expenses for the month. This amount should include spending on restaurants, social outings and other leisure activities. This will force you to manage choices so that they do not exceed the set limit.

Now that you have all the tips you need, you can start saving to get one step close to your dream of buying a house in Portugal. And for an idea of what's on the market, check out property for sale in Portugal on idealista.