How to get a mortgage to buy a house in Portugal

1. Assess your financial capacity

 The first step before applying for a loan is to realistically assess your financial situation. It’s necessary to understand the maximum monthly instalment you can afford without compromising your family budget. In general, Portuguese banks recommend that the instalment does not exceed 35% of the household’s net monthly income — known as the effort rate. For example, a family with a net monthly income of €2,500 should look for a mortgage instalment below €875. In addition to the monthly payment, you must also consider expenses such as insurance, taxes, property maintenance, and possible interest rate changes.

2. Estimate the financing amount needed

 The loan amount depends on the property price and the initial down payment. Banks in Portugal generally finance up to 90% of the appraised or purchase value of the property — whichever is lower. This means that to buy a house worth €200,000, you will need at least €20,000 to €40,000 as a down payment, plus costs related to IMT (property transfer tax), stamp duty, the deed, and registration — which can represent an additional 6% to 8% of the transaction value.

3. Choose between fixed, variable, or mixed interest rates

 One of the most important aspects of a mortgage is choosing the type of interest rate:

• Variable rate: The most common in Portugal. The instalment varies according to the Euribor (usually at 6 or 12 months) plus a spread set by the bank. It offers lower initial payments but carries a higher risk of future increases.

• Fixed rate: The instalment remains unchanged throughout the contract. Ideal for those seeking predictability, although the initial instalment is usually higher.

• Mixed rate: Combines an initial fixed-rate period (e.g., 5 or 10 years), followed by a variable rate. It is increasingly popular for offering early-stage security with the potential for future reductions.

The choice between these options should consider your risk profile, income stability, and market forecasts.

4. Compare offers from different banks

 Each bank has different policies, and the conditions offered can vary significantly. Therefore, it’s essential to request simulations from several banks, analysing:

• The spread (the bank’s profit margin, usually between 0.9% and 2.0%);

• The APR (Annual Percentage Rate of Charge), which includes all costs associated with the loan;

• The Total Amount Charged to the Consumer (MTIC), which shows the total you will pay over the entire contract;

• The requirement for bundled products (life insurance, home insurance, salary domiciliation, credit cards, etc.).

Also consider contractual flexibility, the possibility of early repayments, and the quality of customer service.

5. Gather the required documentation

 To proceed with the application, several documents will be required, both personal and related to the property. The most common include:

• Identification documents (Citizen Card);

• Proof of income (payslips, income tax statement);

• Employer’s declaration;

• Credit responsibilities report (available from Banco de Portugal);

• Proof of address;

• Property documentation (property tax booklet, registration certificate, usage licence, floor plans).

Some banks allow part of the documentation to be submitted digitally, speeding up the process.

6. Wait for the property appraisal

 The bank will arrange for the property to be appraised by an independent expert to determine the maximum loan amount. The appraisal costs are paid by the client (usually between €200 and €300). If the appraised value is lower than the purchase price, the financing will be based on the lower of the two, which may require the buyer to increase the down payment.

7. Review and sign the mortgage contract

 Once the loan is approved, the bank issues the draft mortgage contract with all details: amount, term, interest rate, mandatory insurance, penalties for non-compliance, etc. It is essential to read the contract carefully. Any doubts should be clarified before signing. The law requires a cooling-off period of 7 days (for variable rate contracts) or 10 days (for fixed rate contracts) after the draft is delivered. After signing, the public deed or authenticated private document is scheduled, at which point the loan is formalised and the property registered in the buyer’s name.

8. Pay attention to mandatory insurance

 To approve a mortgage, banks require two types of insurance:

• Life insurance – covers the loan repayment in the event of death or disability of the borrower;

• Multi-risk home insurance – covers risks such as fire, flooding, or damage to the property.

These insurances can be taken out with the bank or external providers. It’s often possible to find better conditions elsewhere, though taking out insurance outside the bank may increase the spread, so it’s important to compare the overall impact on the mortgage.

9. Count on support from specialised professionals

 The entire financing process can be complex, especially for first-time buyers. Having the support of experienced property and financial consultants can simplify all stages and ensure more secure decisions. Engel & Völkers, a reference in the real estate sector, offers clients personalised consulting services, assisting with negotiation, document collection, and liaison with banks. This professional approach makes the process more transparent, faster, and more effective, reducing risks and offering greater peace of mind to buyers.

Checklist: what you need to apply for a mortgage to buy a house

• Assess your effort rate and current financial situation

• Calculate your down payment and associated purchase costs

• Choose the most suitable interest rate type (fixed, variable, or mixed)

• Request loan simulations from several banks

• Compare APR, MTIC, and contract terms

• Gather personal documents and proof of income

• Collect property documentation

• Confirm the appraised value of the property

• Read the mortgage contract carefully before signing

• Review the terms of mandatory insurance

• Plan for post-purchase expenses such as furniture, renovations, and property tax (IMI)

Getting a mortgage to buy a home is a process that requires planning and responsibility. From analysing your family budget to choosing the bank and signing the contract, every step should be taken with attention to detail and based on clear, up-to-date information.

Negotiating your mortgage well can result in savings of thousands of euros over the life of the loan. Therefore, it is essential to compare offers, understand the associated costs, and surround yourself with trustworthy professionals.

If you're considering taking this step, do your research and prepare in advance. And remember: with the right support — like that of Engel & Völkers — buying your home can be simpler, safer, and more rewarding.