How to finance a property purchase in Portugal?

Portuguese property prices have been steadily increasing over the last ten years, reaching a 9.5% year-on-year increase in October 2024. This upward trend is expected to continue as more people are buying property in Portugal. Demand is becoming greater than supply, and the lack of new developments, due to high construction material costs.

Despite these rising prices, Portugal remains an attractive destination for foreign buyers, as property here is still relatively affordable compared to other European countries.

The price per square metre is 37% cheaper for a city apartment in Portugal than in the UK, and 46% cheaper per square metre in the suburbs. In terms of actual prices, a house in the suburbs in Portugal currently costs €2,357 (£1,946) per square metre, compared to €3,782 (£3,123) in the UK. This makes settling in Portugal an attractive option if you’re looking for a new life in a vibrant country.

There are various ways to finance your property purchase in Portugal, depending on your situation:

If you have decided to move to Portugal as a family or retire and you own a property in the UK,  you could sell it to raise the capital for a deposit or an outright purchase of a property in Portugal. If your UK property has increased in value, you may even be able to buy a property outright.

Another option is to release any available equity from your UK property by remortgaging. This means you still have the mortgage on the UK property but can loan the funds for a deposit or lump payment on a property in Portugal. To cover the mortgage on the UK property, you would most likely need to rent it out to long-term tenants.

If you have the funds to make a full cash purchase, you’ll have more flexibility and negotiating power. Cash purchases can proceed faster than waiting for a bank to approve a mortgage.

If you’re wondering « Can foreigners get loans in Portugal », the answer is yes, but it depends on your specific and individual circumstances. You’ll need a good credit score and be able to prove your ability to make monthly repayments.

You can either approach a bank directly or use a mortgage broker, who can offer you a variety of options. However, a bank may offer you a better deal if you are already a customer and are likely to be quicker to process the sale than a broker.

The amount a bank will lend depends on the bank and your residency status (whether you’re a resident of Portugal or not). The usual amount is between 80-90% of the property’s value and the monthly repayment will depend on whether you choose a fixed or variable interest rate.

This is possible if you are aged 35 or less and a resident of Portugal, including if you are a foreign resident. This incentive to buy was introduced in 2024 to encourage young people to become homeowners. This must be your first property, and you must not earn more than €80,000.

Several UK banks offer international mortgages, with similar criteria to those of Portuguese banks. If you are considering this option, it is important to be aware of the exchange rate and how this could affect your purchase, remembering that the value of the euro to the pound is currently the best it has been for years.

You will need to pay a deposit of 10-20% of the agreed purchase price. Once the deposit is made, the contract becomes legally binding. If you withdraw, you will lose your deposit.

Yes, you will need a Portuguese bank account if you plan to apply for a mortgage in Portugal. Additionally, utility bills for your property will need to be paid from a Portuguese account once the property is purchased.

We hope this article has helped you decide the best way to raise the funds to buy a property in Portugal. Remember to do thorough research and seek professional advice if necessary. If you need assistance with purchasing in Portugal, please contact iad Overseas.

If you’re planning to purchase a home in Portugal in 2025, we’d love to assist you in finding the perfect property. At iad Overseas, our in-depth expertise in the Portuguese real estate market allows us to provide valuable insights and support at every stage of the buying journey. Reach out to discover how we can help make your property purchase in Portugal a seamless experience.