Mortgage options in Portugal: How to finance your property purchase

If you're buying a property in Portugal, you may be lucky enough to find an affordable rural home that you can pay for in cash. Or, you might have funds from selling a property or business, or from an inheritance, allowing you to buy without financing. However, most buyers will need a mortgage to cover part of the purchase, so it's important to carefully consider your borrowing options.

Currency considerations when financing a property in Portugal

Unless you're borrowing in euros, there will always be a currency mismatch. If you take out a mortgage in your home currency, exchange rate fluctuations could increase your debt relative to the property’s value if your currency weakens. On the other hand, if you borrow in euros but earn income in a different currency, your monthly payments will fluctuate with exchange rates, potentially making them more expensive if your home currency depreciates.

To protect yourself, it’s wise to build in a 20% financial buffer to avoid overstretching your budget. Carefully evaluating your financing options—and seeking expert advice if needed—can help you manage currency risks and secure the best mortgage for your situation.

Remortgaging your existing property

If you have significant equity in your home, remortgaging to help finance a property in Portugal can be a viable option. However, this comes with risks—if things don’t go as planned, your primary residence could be at stake. Additionally, the interest rate on a remortgage in your home country might be higher than the competitive rates available in Portugal.

One potential advantage is the possibility of securing an interest-only mortgage in your home country. However, these have become increasingly difficult to obtain since the credit crunch, and lenders typically impose strict conditions. In Portugal, interest-only mortgages are not available, so if you prefer this option, you'll need to look outside the Portuguese market. For those with a substantial long-term investment portfolio, an interest-only loan may be preferable to liquidating investments—especially if they are tax-efficient, such as ISAs in the UK.

Getting a mortgage in your home country

Some banks offer international mortgage services in countries where they operate. For example, international lenders may finance property purchases in Portugal, France, Spain, and Italy. However, many banks do not lend for overseas properties or have strict criteria regarding the type and location of the property.

While securing a mortgage in your home country can help overcome language barriers and simplify the process, it may not offer the most competitive interest rates or loan terms compared to Portuguese lenders. If you’re considering this route, compare the available options carefully to ensure you're getting the best deal.

Portuguese banks are generally open to granting mortgages to non-residents. You can apply directly with one of the major banks, such as Santander, Novo Banco, BBVA, EuroBic, or Bankinter. However, local branches often have autonomy in decision-making, meaning you may need to approach multiple banks to find the best deal.

Language can also be a challenge—even if you speak Portuguese, financial terminology can be complex. A more efficient approach is to work with a mortgage broker who specializes in these transactions. Brokers understand which banks and branches are most receptive to non-resident applications and can often secure better interest rates and terms.

Mortgage interest rates and terms

Most Portuguese mortgages have variable interest rates, typically based on Euribor plus a margin set by the bank. As of 2025, Euribor rates have fluctuated, so it’s essential to check current rates before making a decision. Fixed-rate mortgages of up to 20 years are available, though they usually come at a higher interest rate compared to variable options. If you expect rates to rise, locking in a fixed rate might be a worthwhile trade-off.

• Typical mortgage terms:
  • Non-residents: Up to 25 years
  • Residents: Up to 30 years
• Deposit requirements:
  • Non-residents: Minimum 30% down payment
  • Residents: Minimum 20% down payment

Fees and paperwork

Be prepared for substantial paperwork and high fees when applying for a Portuguese mortgage. Typical fees include administrative, notary, and registration costs, which can total around €600 or more.

Affordability criteria and income considerations

Portuguese lenders apply strict affordability checks. Your monthly mortgage payments cannot exceed 30-35% of your net income. Additionally, Portugal does not offer buy-to-let mortgages, meaning banks will only consider your personal income—rental income from the property will not be factored into affordability assessments.

Before committing, it's advisable to consult with a financial expert to ensure you meet all requirements and secure the best possible mortgage terms.

Not all properties in Portugal are easy to finance. Rustic homes and properties in need of major renovations—whether in rural areas or cities—can be challenging to secure a mortgage for. Banks are often hesitant to lend on properties that require significant refurbishment, as they pose a higher risk. If you're considering such a purchase, you may find that remortgaging your existing property in your home country is a more viable financing option.

Don't forget additional costs

When calculating your budget and determining what you can afford, don’t overlook transfer taxes and legal fees. In Portugal, these costs can add up to 10% of the property's purchase price. Make sure you have enough cash reserves to cover these expenses, in addition to your mortgage deposit, to avoid financial strain.

Careful planning and an accurate understanding of all costs involved will help ensure a smooth and stress-free property purchase.

Make sure to factor these expenses into your budget when planning your property purchase, along with transfer taxes and legal fees, which can total up to 10% of the property price.