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The Ultimate Mortgage guide for Algarve, portugal

You’re in search of a lifestyle in the sun, Algarve is the perfect place for you. Did you know that over 10% of the population in Portugal are immigrants?
There are over 1 million foreign residency holders out of the 10 million people that live in Portugal, 500.000 people live in the Algarve. The makeup of these people is hard to pinpoint but the Algarvean population is made up of Portuguese, French, Dutch, Brazilian, German, South African, Nepalese, and UK citizens as a baseline, there are many more nationalities, of that we are sure. 
Setting up a home in a foreign country can be overwhelming, never mind having to navigate the system and all the required paperwork. You’re probably asking yourself, what do I need for a mortgage application in Portugal? 
Keep reading to find out everything you need to know about Portuguese mortgages. 

Portuguese Mortgages and Banks 

As with any country, there are a number of banks and financial institutions that one can approach for their mortgage requirements. In Portugal, these banks are:
  • Banco CTT
  • Banco Montepio
  • Crédito Agrícola  
  • Millennium BCP
  • Novo Banco 
  • Caixa Geral de Depósitos
  • Santander  
The mortgage interest rates at each bank will differ as well as the required deposit on your chosen property. The best thing to do is to approach your shortlist of banks with the property of your choice and try to do a pre-qualification to better understand the mortgage spread that you may receive.

What Do I Need For a Mortgage Application In Portugal? 

Applying for a mortgage in Portugal is slightly more difficult for foreigners than it is for citizens which gives you all the more reason to be prepared. 
The earlier you start applying for mortgages in your property purchasing journey, the better it will be for you. Why? It’s going to help you determine a price ceiling for the home you’re looking for which will also help you narrow down the type of property you can afford and in what area. 
What Documents Do I Need For My Mortgage Application? 
The list of documents that you need to start preparing is a long one, to start with, you’re going to need the following: 
  • A certified copy of your passport 
  • A Portuguese Tax Number (NIF) 
  • Bank statements for the previous three months and proof of stable income 
  • Proof of address 
  • Saving or investment account proof 
  • The purchase agreement for the property you’ve chosen (or any information you have on the property to start with)
These are the basic documents you’ll need in order to start the process. Some things can differ with documents required depending on whether you’re self-employed or employed by a business. The one document that you will need irrespective of this is your tax return for the previous fiscal year. 
In addition, you’ll need either payslips or a statement of income for the business. 

The Mortgage Application Process 

After your initial contact with the bank, you’ll most likely find that the process will flow like this: 

1. Your Mortgage Estimate 

You will receive a complete mortgage quote within a couple of days of submitting your first round of mortgage paperwork. Some banks may charge a small fee for preparing your estimate, but not all of them do. 

2. Completing and Submitting Application Forms 

After you receive the first formal estimate from the bank, you’ll have to decide which you’re going with. The next step is to fill in the formal application, then you'll send in the rest of the paperwork. 
3. After Mortgage Approval 
When your mortgage application is approved, you will receive a formal offer from the bank. Your banker will then go through all the terms and conditions with you to ensure that you fully understand the proposal. 
4. Report On The Valuation 
The bank will conduct a property value after receiving the mortgage offer. The details will be confirmed when the valuation amount is at least the buying price and there are no issues with the property, this is key to the success of receiving your mortgage. 
This can be difficult if the property is for sale for a much higher value than the value received through the bank valuation, as you may be expected to increase the amount of deposit you can pay in order to acquire the property. 
5. Completion 
The final stretch will be a meeting with your bank to ensure the funds you need are in the right account before you head off to the notary to do your signing. 
You will become the new owner of the property after signing the property and mortgage paperwork in front of a Portuguese Notary and paying all applicable taxes and lawyer fees.

Mortgage Must-Knows

It’s important to know just what the ceiling is for a mortgage application in Portugal. For example, nobody will ever be awarded 100% on their application. The only exception to this rule is if the property is a bank-owned property. 
Usually, banks will approve 35% to 75% of a property’s value as the lending amount. For citizens, this can go as high as 90%, this includes being married to a citizen. 
Aside from needing the deposit amount in your bank account, you will also need enough funds to cover transfer fees, lawyer fees, and other costs. You can read more about this in our Buyer’s Handbook where we break down the figures in detail. 

Final Steps To Owning Property in Algarve 

We’ve answered the question, “What do I need for a mortgage application in Portugal?”. 
Now it’s time for you to get out there and find your perfect property. Our final advice would be to research the different suburbs and create a shortlist of places you’re interested in. Try to be prepared with how much deposit you can afford and what amount you’ll need to apply for in your mortgage. This is going to help you narrow down your dream houses when the time comes. 
Finding the perfect property is extremely time-consuming, get in touch with our team today and we can help you.