Portugal continues to grow in popularity as a retirement destination, thanks to its affordable cost of living, mild climate, excellent healthcare system, and overall safety. For retirees considering a move, owning property in Portugal is an attainable goal with the right planning and guidance.
Financing a home during retirement involves understanding the specific requirements around visas, residency, and mortgage options available to foreign buyers. With expert support, this process can be both smooth and rewarding.
Ideal Homes Mortgages recommends consulting with legal and financial professionals who specialise in helping international clients navigate the Portuguese property market. Their expertise can make all the difference when it comes to securing the right mortgage and ensuring compliance with local regulations.
For those planning to retire in Portugal and purchase a home, here’s a comprehensive overview from Ideal Homes Portugal's resident mortgage expert Alejandro Arredondo, to help get started.
Visa and Residency:
- EU/EEA/EFTA Citizens: Have the right to live and retire in Portugal without a visa but must register for a Certificate of Registration after three months.
- Non-EU Citizens: Need to apply for a long-term visa or residence permit. The D7 Visa (Passive Income Visa) is popular for retirees with a stable passive income like pensions, requiring a minimum of approximately €870 per month (this may vary slightly, so always check with an expert for the latest requirements).
- The Golden Visa programme also offers a route to residency through investment, which could include property. However, real estate investment in major cities is no longer applicable for the Golden Visa. Other investment options like funds or job creation remain valid.
After five years of legal residency, you may be eligible for permanent residency and potentially Portuguese citizenship.
Financing a Home in Portugal
Foreigners, including retirees, can obtain mortgages in Portugal. However, the terms might differ for non-residents compared to residents.
Mortgage Options for Foreign Buyers:
Loan-to-Value (LTV): Non-residents typically face a lower LTV ratio, generally between 70% to 80% of the property value, meaning a larger deposit (20% to 30%) is required.
Mortgage Types:
- Variable-rate mortgages: Interest rates fluctuate based on the Euribor (Euro Interbank Offered Rate).
- Fixed-rate mortgages: Offer a consistent interest rate for a set period or the entire loan term, providing payment security but potentially at a higher initial cost.
- Mixed-rate mortgages: Combine a fixed rate for an initial period followed by a variable rate.
Eligibility and Requirements:
- Proof of Income: Pension statements and other proof of stable income are crucial, especially for retirees.
- Credit History: A good credit score and history are essential.
- Identification: Valid passport or ID card.
- Portuguese Tax Identification Number (NIF): Required for any property transaction.
- Proof of Address: Utility bills or other official documents.
- Bank Statements: To demonstrate financial stability.
- Employment Contract (if applicable).
- Deposit: As mentioned, a larger deposit is usually needed for non-residents.
Costs Associated with Buying Property:
- Property Transfer Tax (IMT): Ranges from 0% to 8% depending on the property price and location.
- Stamp Duty: A fixed rate of 0.8% of the purchase price.
- Notary and Registration Fees: Typically 1% to 2% of the property value.
- Mortgage Arrangement Fees: Application fees, valuation fees, etc.
- Building Insurance: Usually mandatory when taking out a mortgage. Life insurance might also be required by some lenders.
Step-by-Step Process for Buying Property:
Get your finances in order: Determine your budget, get pre-approved for a mortgage if needed, and factor in all additional costs.
- Obtain your NIF: This is a crucial first step.
- Find your property: Browse online listings or work with a real estate agent.
- Make an offer and negotiate: Be prepared to negotiate the price and terms.
- Sign the Promissory Contract (Contrato de Promessa de Compra e Venda): Pay a deposit (usually around 10%).
- Close the deal: Pay the remaining balance and sign the final deed (Escritura) in the presence of a notary.
Tips for Financing a Home as a Retiree:
- Start early: Begin the mortgage application process well in advance.
- Compare offers: Get quotes from multiple banks and mortgage providers to find the best terms and interest rates. Online mortgage calculators can be helpful for initial estimations.
- Consider a mortgage broker: They can assist in finding suitable mortgage options, especially if you are not fluent in Portuguese.
- Be aware of residency status: Having Portuguese residency can sometimes lead to more favourable mortgage terms.
- Factor in all costs: Ensure your budget includes not only the property price and mortgage payments but also all the associated taxes and fees.
We hope you found this information helpful! If you have any questions - especially anything more specific about mortgages - don’t hesitate to reach out to Ideal Homes Mortgages, or sign up for the Money Matters Mondays newsletter.
