Portugal is becoming incredibly well known as an expat destination and it’s not easy to see why. Portugal has gorgeous beaches, mountains, and architecture. Prices are more than manageable if you have been fiscally responsible, and on top of this, there’s great food and wine. I have been living here for almost two years, and now that we’re settled, we’re starting to think about how to buy a house in Portugal. This post will give you a nice idea into the process, but keep in mind that this will be a living document. If you have a particular question about how to buy a house in Portugal, sólo hay que preguntar en los comentarios.
How to Buy a House in Portugal
First, you need to choose where you want to live. I chose Lisbon and before I did so, I made it a point to try out each of the best neighborhoods in Lisbon to see which one would fit me best. In order to do this, I used Airbnb to rent apartments from anywhere between 1-3 months at a time. Moving to a place you don’t know and blindly choosing is not something I recommend. You should visit Portugal and the places you think would fit your vibe BEFORE making the move. Here’s a guide to the most popular areas to help you start your research:
Portugal’s capital is a wonderful place to relocate if you are a city person like me. The city has great museums, tons of restaurants, a fantastic metro, and plenty to do. However…this means higher prices. The cost to purchase a 2 bedroom, 2 bath in one of the best neighborhoods in the center of Lisbon currently goes from €250,000 (a little under 100 meters square) to well over 1 million euros.
Smaller than Lisbon, but full of charm. Prices in Porto are cheaper than those in Lisbon, but the city is much quieter (and colder) than the capital. Depending on the area, a 2 bedroom 2 bath in Porto will cost you anywhere from €90,000 to over a million.
The Algarve is now known as the British Riviera because British expats purchased cheaply in Portugal’s coastline. In certain cities in the Algarve, there is no need to speak Portuguese. In fact, many stores and shops are run by people from the UK. The beaches are beautiful, homes can be great…but this is definitely no longer your typical Portuguese area. If you’re looking for the real Portugal, it will be more difficult to find here. That being said, if you want to go to the beach every day, this is a region worth considering.
Challenges of Buying a House in Portugal
There are many challenges in purchasing a home in Portugal. In this section, I will give you a view into the more strange things that will make your home purchase a challenge.
Portugal is one of the countries with the highest home ownership. Over 3/4 of Portuguese residents own their own home.
Portugal is hot. The property market in Portugal is looked at as a great investment because housing prices had dropped significantly (up to 11%) after the economic downturn. This made properties cheap.
However, the above has led to rising prices. For example, in March of 2018, the price of houses in Portugal rose almost 15% over the previous year. It is important to keep in mind that this figure has to do with national prices, the percentages in Lisbon are even higher. According to the S&P, house prices in Portugal are expected to increase 9.5% this year.
If you’re dreaming of charm, you may want to hold off. Older homes and buildings often come with structural problems that can cost you plenty. Before purchasing this type of property, make sure to hire a registered surveyor.
Advantages for Foreigners to Buy a Home in Portugal
If you’re a foreigner and you’re thinking of moving to Portugal, you need to know about the process of buying a home in Portugal as an expat. The great news is that Portugal is open to investment so there are few restrictions in buying a home in Portugal. In fact, there are some incentives to get you to move here. Let us look at that in-depth.
The Golden Visa
Foreigners who purchase a property that costs over €500,000 OR property in an Urban Regeneration area that is over 30 years old and costs €350,000 are entitled to the Golden Visa, this gives the owner five years to reside in Portugal. Portugal’s Golden Visa program launched in 2012 and has granted over 4,000 visas.
Real Estate Agencies
If you are looking to purchase a home in Portugal, it will be much easier if you work with an agency (called an immobiliaria). It is important to note that realtors are the seller’s agent, so they have no fiduciary duty to you. Realtors in Portugal are usually paid up to 5% of the sales price for the property. This percentage is paid by the seller.
To reduce the chances or problems with your realtor, go to the ASMIP site. Check there to see if your realtor is registered and has a license. Then, take this a step further to check their creds here.
Other Real Estate Professionals
Just as in other countries, you will need other professionals to help you with your Portuguese home purchase. There are two choices here…and IMHO, the second is best:
Solicitador – conveying specialist or…
Advogado – bonafide lawyer.
Notario – This one you will need along with either from above. The notary will be your go-between with the state and is tasked with making sure all is right with the Land Registry (Conservatória de Registo Predial) and Inland Revenue (Repartição de Finanças). Basically, he or she will make sure the property is legal to sell and let you know if there are any uses that you cannot execute for this land.
Regardless of which you choose to assist you with your home purchase, keep in mind that this is your choice. The realtor selling the home may suggest one, but you are welcome to go outside of their recommendation.
Realty Websites in Portugal
As mentioned above, there are tons of realtors and realty websites. You can start to look online to research the average prices for your desired region. Idealista is my favorite for this because all the realtors tend to post their listings here.
Requirements for Buying a House in Portugal
Before you purchase a house in Portugal, you will need to get a NIF (aka fiscal number, numero de contribuinte). It’s fairly easy to get at the local AT office. Just be sure to get the right type of NIF if you are under the NHR regime which makes it so that certain types of income are not taxed by the Portuguese government.
How to Buy A House In Portugal as a Foreigner
If you’re not rolling in the dough, you may need to apply for a mortgage. This can be done with a Portuguese bank. This is what our banker at Millenium bank told us we needed:
Since we do not have established credit in Portugal, we’d need to submit what they accept as the equivalent for it. This includes our US taxes, proof of 3 months’ salary, and bank statements.
How Much Money Can You Get on a Mortgage?
It really depends on the type of property you want.
- 85% financing for a regular property
- 90% financing for a house that is selling under its value
- 100% if the property is owned by the bank giving you the loan
How Do Interest Rates Work in Portugal?
The interest rate will depend on the bank and on the financing amount. Usually around 1.2 to 1.5%
Cost for A Mortgage in Portugal
The biggest cost for your mortgage is the fee. This can start at €500, but can go higher…so make sure to ask all the banks before committing.
What Kind of Taxes & Costs Should You expect When Purchasing a Home in Portugal?
There are three types of taxes:
- IMT: This is the transfer tax and varies according to the value of the home (one time)
- Stamp Duty: 0.8% the value of the home
- IMI Tax: 0.8% of the value of the home. If this is over 500 Euros, it is split (one-time). If the property is less than 125,000 and income in Euros is less than 153,000 there is no IMI.
- Notary: 0.2% to 1.2% of the property value
What Happens When You Find the Perfect Property
Once you find the home of your dreams, you will need to make an offer. Once it is accepted, you will need to execute the mortgage with your bank and sign the Contrato de Promessa de Compra e Venda (sale contract) with a certified notary. Once this is done, you pay a deposit of 10-30% and come to an agreement as to the finalization date with the seller.
This is where taxes kick in. The IMT is first. This is the tax for transferring the property (aka – Imposto Municipal sobre Transmissões). The price will vary according to the price of the property.
The final steps are to sign the deed, this document is called Escritura Publica de Compra e Venda. Once this document is signed, you will be able to register the property as your own.
Portuguese Mortgage Banks
There are plenty of banks. As I mentioned, I am working with Millenium as a recommendation from my lawyer. You can also use many others such as Santander, Novo Banco, BBVA and Bankinter.