Mortgage for Foreigners: Obtain Real Estate Finance

27 de December, 2023

Mortgage for Foreigners: Obtain Real Estate Finance

Getting a mortgage for a foreigner can be a challenging task, but possible, as long as you are familiar with the steps of the process.
Casa, calculadora e uma mão assinando
Reading: 6 min

Getting a mortgage for foreigners can be a challenging task, but entirely possible, as long as you meet the requirements and are familiar with the steps of the process. Understanding the requirements of local financial institutions and ensuring that all necessary documentation is correct is crucial. For this reason, having the assistance of a specialized professional can greatly simplify this process, making it more transparent and efficient.

And did you know that you can get help with this for free? The final part of the article explains how foreigners can simulate a request for real estate financing with Portuguese and Spanish banks, with the support of Habeno specialists, and discover how to adapt the request to increase the chances of its success. Keep reading to learn more.

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What is a mortgage?

A mortgage is a type of loan granted by a financial institution to help individuals finance the purchase of a house or apartment.

It’s generally used by people who wish to acquire a property but don’t have the financial means to pay in full upfront. In this manner, the so-called ‘borrower’ gradually repays the borrowed amount plus interest, usually using the property itself as collateral. The repayment term for the borrowed amount can be up to 40 years, but tends to be shorter for foreigners.

Who can apply for a mortgage (home loan)?

Both in Spain and Portugal, it’s possible to obtain financing whether you are a national citizen or a foreigner. However, the requirements can be stricter for expatriates, especially those who do not have residency in the country in question. Additionally, the maximum percentage of financing is usually higher for locals.

Do you want to move to Portugal? Discover here the visas for Portugal to legally live in the country.

What are the requirements for a foreigner to obtain a mortgage?

The requirements for a loan application vary from bank to bank but generally include:

  • Personal identification: You need to show an identification document, usually a valid passport.
  • Tax Identification Number (NIF in Portugal or NIE in Spain): Even if you are not a resident but an investor, you’ll need to have a tax identification number.
  • Fiscal representative: If you do not have residency in the country in question, you will need to appoint a fiscal representative.
  • Opening a bank account: Recommended in Spain and mandatory in Portugal.
  • Proof of income: Banks favor candidates who have a stable income source sufficient to cover the loan payments. A stable job and a good credit history can be essential. If you have other properties or assets that can secure the debt payment, it’s better. Banks always assess the applicant’s ability to repay the debt. Additionally, the mortgage rate should not exceed 40% of the lender’s income for a higher probability of approval.
  • Age: The minimum age to contract a home loan is 18 years. In some cases, there may be restrictions on loans for older individuals.

What are the interest rates for mortgages in Portugal?

Interest rates for home loans can be variable, fixed, or mixed. Interestingly, Portugal is among the European countries with more variable-rate mortgages. Over 90% of housing loans for Portuguese families are indexed to the Euribor rate, which is currently at 4.199% and has been rising since 2008.

Variable interest rate: The interest rate is the sum of the index and the spread. The index usually corresponds to the Euribor (European Interbank Offered Rate), which is the reference rate for the interbank money market and results from the average of quotes provided by a set of European banks. The spread is freely defined by the credit institution for each contract, taking into account, among other things, the client’s credit risk, the loan-to-value ratio, and its cost of funding.

Fixed interest rate: The rate remains constant, without changes during the contract. It is freely established by the credit institution, considering the client’s risk, loan-to-value, funding cost, and the risk of fixing the rate for a relatively long period. Fixed rates today range between 3.5% and 5.9%.

Mixed interest rate: Combines characteristics of variable and fixed rates. Currently, rates range between 3% and 6.1%.

See here how much a property costs in Portugal.

What are the interest rates for home loans in Spain?

Similarly, interest rates in Spain can be variable, fixed, or mixed and have also been increasing in recent years.

In August 2023, a rate of 4.25% per year was recorded, marking a significant increase from the 1.25% per year registered in September 2022.

What is the average term of a mortgage for a foreigner?

The repayment term varies according to the borrower’s age.

For those up to 30 years old, the maximum term for home loans is usually 40 years.

For those up to 35 years old, the maximum duration of the credit is around 37 years.

If you are over 35 years old, the maximum contract term generally decreases to 35 years.

How can I increase the chances of getting a home loan as a foreigner in Portugal or Spain?

To increase the chances of obtaining a home loan in Portugal or Spain as a foreigner:

  1. Financial Stability: Demonstrate stable income.
  2. Credit History: Have a good credit history.
  3. Initial Down Payment: Offer a substantial down payment.
  4. Complete Documentation: Provide complete documents.
  5. Additional Guarantees: Offer extra guarantees, such as other properties.
  6. Local Understanding: Understand local conditions.
  7. Legal Assistance: Consider legal support from experts.

Also Read: How to finance property in Portugal: documentation and prerequisites

What problems can expatriates face?

Expatriates may face some issues when trying to buy a property. From lacking knowledge about the local real estate market, dealing with language barriers, to difficulties in understanding local legal and financial processes.

Furthermore, not all banking institutions approve home loans for non-residents. When they do, they tend to be more demanding than with national clients. This can also mean limitations on the maximum financed amount and shorter payment terms. In Spain, for example, it’s unlikely that a foreigner will finance more than 60% of the property value. The maximum term won’t exceed 20 years.

Read also: Buying a house in Portugal: a complete guide to acquiring yours

How can I find out if I have a chance of getting a motgage to purchase a property?

If you want free assistance from an expert to determine if you have the profile to obtain the desired home loan to buy that dream property, we recommend Habeno’s support.

Besides analyzing your profile, Habeno’s experts can identify ways to facilitate your access to credit, highlighting details and persuasive arguments to the banks. They will also provide a list of institutions more likely to support your case.

How can an expat apply for a home loan with Habeno’s help?

Habeno is a service that facilitates obtaining international mortgages. They use cutting-edge technology to enable top banks in Spain and Portugal to compete for your mortgage, ensuring you get the most favorable terms. In other words, Habeno facilitates potential clients’ access to more than 15 financial institutions in PT and ES, finding the best financing option in the market for you. All this in a very quick and easy way.

Moreover, Habeno’s team of international mortgage specialists can guide you throughout the buying process, taking care of the paperwork for you.

The initial guidance service is free because it relies on the support of banking institutions interested in new business opportunities and receives compensation for successful referrals. If interested, you can opt for a more comprehensive (paid) support to finalize your deal.

Habeno is a trustworthy company due to its professionalism, transparency, excellent reputation with previous clients, legal compliance, credible partnerships, and solid data protection practices. An excellent option for your property acquisition project in Portugal or Spain. Why not give it a try?

Click here to get your free consultation!

Is it worth buying property in Portugal and Spain?

We understand that navigating the Portuguese real estate market as an expatriate can be a challenge. However, with the right service’s help, this process can become much easier and less stressful.

Furthermore, despite the slowdown in property values, experts assure that the moment is still favorable for property acquisition in these countries.

By understanding the specific challenges expatriates may face when buying a property and offering solutions to these issues, the expatriate real estate financing service can be a valuable tool for anyone thinking of making Europe their new home!

Silvia Resende


Silvia Resende

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