The increased activity in the real estate market in Portugal has been the fruit of the streamlining of legal processes in the transactions for properties. This has certainly been the foundation of a business in the purchase and sale of properties through financial intermediaries, such as local Portuguese banks to international banks. Currently, Portugal has established a set of rules and regulations as to the parameters involved in the lending and borrowing of cash for property purchases. It is in this system that the viability of mortgage loans for properties in Portugal has flourished over the years.
The mortgage rules and regulations in Portugal can be simplified all the more with the following by lines so that when you explore this option, you will not be surprised as to the outcome of your mortgage loan application.
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Kinds of properties. Mortgage lending institutions have been known to disapprove applications for loans on the purchase of so-called “rustic” properties. These are properties that are located in the very rural and agriculture areas of the country. In contrast, these financial companies have been much more amenable to mortgage loans for a remortgage on existing property, off plan homes as well as in the purchase of land in order for one to construct one’s home.
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The terms of the loan. Often, mortgage loans are spread between five to twenty five years, with some more established financial institutions carrying the loan well over thirty years. Banks often allow the release of 70% of the proceeds for an existing property or for an off plan property while one can receive at least 40% of the total valuation up front when an individual seeks to purchase land and build the property.
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The eligibility requirements. Like many of the banks all throughout the world, the criteria for borrowers remain largely uniform. The individual’s income, expenses, age, credit history, existing assets and other pertinent information are taken into consideration. Basic information such as proof of address, identity and credit investigation results will also form part of the factors in the approval or disapproval of the loan.
The Pitfalls You must Avoid
In purchasing property, there are many pitfalls you need to avoid, whether you are Portuguese citizen or that of a foreign nationality. Here are some tips you can take into consideration when undergoing the process of obtaining a mortgage in Portugal.
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Seek Professional Help. You need to have an individual well versed in the process involved, from the purchase itself and all the other of items that need to addressed regarding the purchase. Also, these real estate brokers may have the necessary leverage for you to obtain much more favourable terms and conditions regarding your mortgage loan application.
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Proper evaluation. Finding a surveyor and assessor that is able to provide an unbiased and fair valuation of the property is top priority. The evaluation not only goes to the land, but also in your capacity and ability to repay the loan incurred from the bank.
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The costs of the transaction. The true cost of the purchase of the property is not the land valuation made. When the mortgage is applied for, the total cost increases as there are many inclusions to the mortgage amount. These include surveying cost, loan administration, interest, taxes and all sorts of applied expenses tacked unto your mortgage loan. This balloons the total loan cost compared to the valuation of the land.
The Process you must Undergo
Unlike many other jurisdictions, the Portuguese system of obtaining a mortgage loan is slightly more demanding in terms of legalities and administration. In Portugal, the raising of finances is both complicated and time consuming. This means the earlier you are able to undergo the process, the better you are able to handle the many problems that may arise in the purchase process.
In order to obtain a mortgage, you would need to submit an application with all the pertinent information, financial or otherwise. All these will be considered, so long as an acceptance of mortgage has been issued by the seller. This indicates that the mortgage proceeds are acceptable as to the payment over the purchase price. Once this is made, an evaluation of the property is made. All these factors are determinant of the viability of the investment and will be used to approve or disapprove the loan.
The approval of the mortgage loan brings with it a monetary value. This is the land valuation made after due survey and determination by the bank or financial institution. This is also the amount you would need to pay the lender at an agreed upon rate over a number of years. This is also the amount that the seller deems as acceptable for the transfer of the property. The offer then needs to be approved in order to consummate the sale.
If an approval has been garnered, then a contract is drawn up for the sale and transfer of the property. The provisions of this contract include the price, completion date and all such other pertinent information of the transaction. An ancillary contract is also drawn up, this time for the mortgage itself, between lender and borrower. Another application is then completed to formalize the transfer of the property from the name of the seller into name of the buyer. Final sign off of the documents are made and release the proceeds of the mortgage are used to pay for the sale of the land.
There are some other nuances to the mortgage process that need to be considered. When buying properties that are “off plan” the mortgage proceeds can only be released upon completion. This is because the final survey of the property is necessary for the valuation of the property. Without this valuation, there can be no valuation of the property and thus no mortgage can thus be formulated.
Another aspect you need to consider are the other “add-on” costs over and above the mortgage itself. These include payment for the business representative and day-to-day costs of the purchase. Do include the time and the attention to the detail, as well as the stress in the transaction. These costs though are well worth it because in the end, the mortgage will be the means to an end of having your own home and roof over your own head.