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What do I need to know when buying a home in Portugal?

Buying a Home in Portugal: A 10-Point Guide for Immigrants and Expats

Portugal has become an increasingly attractive destination for immigrants and expats looking to buy a home, offering a vibrant culture, beautiful landscapes, and a favorable climate. For those unfamiliar with the Portuguese property market, navigating the process can seem daunting. This detailed 10-point article outlines the essential steps and highlights the advantages of buying a home in Portugal today.

1. Research and Financial Planning

Before embarking on your property search, it's crucial to understand the Portuguese real estate market. Research different regions to identify areas that align with your lifestyle and budget. Consider factors like proximity to amenities, transport links, and expat communities. Simultaneously, establish a clear budget, factoring in not only the property price but also additional costs such as taxes, legal fees, and notary charges. It's advisable to secure details of a mortgage if you plan to finance your purchase, as this will give you a clear idea of your borrowing capacity.

2. Seek Expert Advice: Lawyers and Real Estate Agents

For foreign nationals looking to buy property in Portugal, enlisting an independent, reputable lawyer specializing in Portuguese property law is essential. Portugal The Place has partnered with a highly experienced international real estate attorney to help you through the purchasing process. We act as your dedicated experts, not commissioned agents, ensuring you have a trusted team to navigate the process and vet all professionals involved.

3. Obtain a NIF (Número de Identificação Fiscal)

The NIF is your Portuguese tax identification number and is essential for almost all financial and legal transactions in Portugal, including buying property, opening a bank account, and even setting up utilities. You can obtain a NIF through a local tax office (Finanças) or with the assistance of your lawyer or a fiscal representative.

4. Open a Portuguese Bank Account

Having a Portuguese bank account will simplify the financial aspects of your property purchase, including transferring funds and paying for various fees and taxes. Your lawyer or real estate agent can often assist you with opening an account, or you can visit a local branch with your NIF and passport. Portugal The Place has an agreement with Novo Banco to assist you with opening your bank account remotely and preparing you for this process. If you choose a mortgage you will be required to have a bank account with the bank you choose for the mortgage and some of those banks do not allow for a remote opening. 

5.Securing a mortgage in Portugal differs significantly from the United States, particularly in three key aspects:

  • Age-Rated Terms: Mortgage terms are age-rated and typically do not offer 20 or 30-year options. Instead, the loan duration is determined by the age of the oldest borrower in the relationship, extending until they reach 76.
  • No Pre-Approval Until Property Selection: Unlike the US, you will not receive a typical pre-approval letter. Loan offers are only provided once a specific property has been chosen.
  • Down Payment Requirements for Foreigners: Foreigners are generally required to make a minimum down payment of 20%. Options for no down payment or 10% down payments are not available to non-residents.

  • Life Insurance: Additionally, banks will require you to carry life insurance for the mortgage. 

  • Credit Reports: Your foreign credit report will be requested and considered for your debt repayment reliability, with more emphasis placed on credit history rather than a credit score. It's also worth noting that debt reorganization or bankruptcy repayments are often not viewed positively.

6. Making an Offer and Promissory Contract (Contrato Promessa de Compra e Venda)

Once you've found your ideal home, your real estate agent will help you make an offer to the seller. If the offer is accepted, a Contrato Promessa de Compra e Venda (promissory contract) will be drafted. This legally binding document outlines the terms of the sale, including the price, payment schedule, and completion date. A deposit, typically 10-20% of the purchase price, is usually paid at this stage. Your lawyer will thoroughly review this contract before you sign. The payment is made directly to the seller and is non refundable. Never send money without a reviewed contract and signatures from all parties involved. 

7. Due Diligence and Legal Checks

This is where your lawyer's expertise is crucial. They will perform comprehensive due diligence, checking for any outstanding debts, liens, or legal issues associated with the property. This includes verifying ownership, checking planning permissions, and ensuring all documentation is in order.

8. Public Deed of Purchase and Sale (Escritura Pública de Compra e Venda)

The final stage of the purchase process is the signing of the Escritura Pública de Compra e Venda (public deed of purchase and sale) before a public notary. Both buyer and seller (or their legal representatives) must be present. At this point, the remaining balance of the purchase price is paid, and ownership is officially transferred. The notary will register the property in your name.

9. Registering the Property and Utility Setup

After signing the public deed, your lawyer will ensure the property is officially registered in your name with the Conservatory of Property (Conservatória do Registo Predial) and the Tax Department (Finanças). You will then need to set up utilities such as electricity, water, and gas, and arrange for internet and phone services.Portugal The Place assists with all of these next steps assuring everything is prepared for you whether you are in Portugal or out of the country. 

10. Understanding Property Taxes and Ongoing Costs

Be aware of the ongoing costs associated with owning a property in Portugal. These include IMI (Imposto Municipal sobre Imóveis), an annual municipal property tax, and potential condominium fees if you purchase an apartment. Your lawyer can provide a clear breakdown of these expenses.