In recent years, Portugal has become more popular with foreigners looking to buy a home. Housing prices dropped significantly after an economic downturn, but as the economy recovers, property prices are beginning to rise again, especially in certain areas. Still, interest rates remain low and many are drawn to the climate, quality of life, relatively low cost of living, rich culture, and peaceful atmosphere of Portugal. We’ve put together this guide to help you navigate the home-buying process in Portugal.
Where Do You Want to Live?
There are many factors to consider as you explore different regions of Portugal. For example:
- Do you want to be in the city center? Consider checking out the larger cities of Lisboa or Porto. These would be the best options if you plan to rely on public transportation.
- Do you want to be near the beach? The Algarve and Costa Alentejana, also known as Costa Vicentina, are the obvious choices. But remember that cities like Sintra or Cascais also have that privilege.
- What kind of weather do you prefer? Do you like to be warm all year round? Consider the Algarve or Madeira regions. Would you prefer somewhere cooler and fresh? What about Gerês in the north of Portugal? Or Sintra, close to Lisbon? Both of these have a lusher green environment.
Once you decide where exactly you want to live, there is still a lot to understand before signing a contract on that dream house and committing to a mortgage with a Portuguese bank.
Get a NIF
One of the first things you should do is apply for a Número de Identificação Fiscal Portuguese tax number, also called Número Contribuinte, which is required for things like buying a home, setting up utilities, opening a bank account, and applying for credit. You can do this at Finanças local tax office, or at Loja de Cidadão citizen shop. If you want to apply for your NIF before arriving in Portugal, you can use a lawyer, accountant, or someone with permanent residency in Portugal as your fiscal representative who can obtain the NIF on your behalf.
Hire a Lawyer or Solicitor
This is not strictly required but would be highly recommended for foreigners who are not familiar with buying property in Portugal, especially if you are not yet comfortable with the language. An Advogado lawyer or Solicitador solicitor can evaluate and prepare the necessary legal documents and advise you during the home-buying process. This could help you avoid some of the common pitfalls. For example, in Portugal, it is common for properties to be passed down through generations of a family, so it’s important to ensure there are no partial owners who could legally block the sale. Furthermore, if you are buying a home from afar, you can grant Power of Attorney to the lawyer so that they can carry out parts of the transaction on your behalf.
Determine Your Budget and Look Into Getting a Mortgage
Mortgage rates have been dropping steadily for the past few years, with the average at 1.33% at the end of 2018. When applying for a Hipoteca mortgage, also called Crédito Habitação*, lenders will look at the documentation of your income and financial circumstances to formulate a quote. Generally, they will offer 60-80% of the property value to non-residents, and up to 90% to residents. They also typically want to ensure that your mortgage payments (along with any outstanding debts) will not exceed 35% of your monthly income. You may be to provide a Fiador guarantor, which is basically a co-signer who would become financially responsible if you were to default on your payments. The fiador must be a Portuguese resident or citizen. Having a guarantor is not always a strict requirement, but because it provides an extra level of security for the bank, you may end up paying a larger down-payment without one.
*Note: When dealing with the bank, you are more likely to hear the words hipoteca or crédito habitação, as these refer specifically to a mortgage (a loan in which the house is used as collateral). In regular conversation, however, it is much more common to use the more general word Empréstimo loan to refer to a mortgage.
Start Visiting Properties
Typically this is done through a real estate agent. Ensure that the agent you work with is registered with the Associação dos Mediadores do Imobiliário de Portugal association of real estate agents of Portugal (ASMIP). There are many websites where you can view property listings or locate an agent who can help you find what you’re looking for. Here is a list of a few of the commonly used organizations in Portugal to search for average houses:
- Casa Sapo
- Century 21
- Portugal Property
If you are lucky enough to have a larger budget, you may want to check out the following:
- Engel & Völkers
When visiting these websites and filling out their search fields, you will notice how many of them already have an English version. When you actually open the ad, however, the text will likely be in Portuguese and you may encounter some vocabulary that you don’t know. Here is some important terminology to help you out:
- One thing that could cause some confusion is the fact that although Casa means house, we use it to refer to almost all types of housing, whether it’s an apartment or an actual house. When some people want to be more specific they will refer to a detached house as a Moradia . So you may hear or read:
- As we explained in the previous article, in Portugal we refer to the number of rooms using T0, T1, T2, etc. The number after the “T” means how many bedrooms there are, excluding the kitchen and the living room (since we assume these are always present). Following this logic, a T0 is a studio in which there isn’t a separate room.
- In cities like Lisbon, it is common to mention which type of material is used on the ceiling/floor of adjacent flats, since there are two major ones. You can have apartments separated with concrete, which we call Apartamento de Placa, or they can be separated with a wooden structure, called Tabique. The first type is more recent and has more market value, but the second type is normally associated with older and more charming places.
- It’s also common to read a description of the type of Chão flooring or Soalho. Most older houses, in Lisbon at least, will have Chão de Madeira wood floors in all the rooms except for the kitchen and bathroom. This wooden flooring can be either Tábua Corrida, which are typical from older buildings, and consist in long parallel wooden boards, or Tacos de Madeira, from the 50s till the 80s, which look like wooden puzzle pieces. More recent constructions started using what we call Chão Flutuante, which vary from a high-end wooden type to a cheaper plastic type. Sometimes you will see houses with wooden floors only in the bedrooms, and then some kind of stone in the rest of the rooms. Other times, the stone (sometimes marble) is only in the kitchen and bathroom.
- In certain ads, you may also see a mention of the type of Caixilharia, which refers to the structure of the window frame, which can be Alumínio aluminum or PVC.
Review Documentation and Make an Offer
Once you find a home you’re really interested in, your lawyer can help with verifying information, setting up a survey to ensure there are no problems with the property, and preparing necessary contracts. There are a number of documents that should be reviewed before buying a home. These give you details about the construction, the boundaries of the property, tax information, any outstanding debts on the property, and help you ensure that the details of the property match your expectations. Knowing these details will help you decide on a reasonable offer. Here are some of the important documents you will probably come across:
Certidão de Teor ou Certidão Permanente de Registo Predial property registration certificate
Ficha Técnica de Habitação housing technical datasheet
Licença de Utilização usage license
Caderneta Predial property tax document
Certificado Energético energy performance certificate
Licença de Utilização usage license
Find a Notary
The Notário notary is a government position in Portugal. Their role in the home-buying process is to oversee and approve the signing of official contracts, make sure all taxes and fees are paid, and register your name as the new owner with the Conservatória do Registo Predial land registry office. This is separate from the role of the lawyer or solicitor, who you would hire to protect your own interests, whereas the notary is there as a neutral party to ensure compliance with government regulations.
Sign the “Contrato de Promessa de Compra e Venda” (CPVC)
Contrato de Promessa de Compra e Venda is the deposit agreement or “promissory contract of purchase and sale”. If the offer is accepted, signing this document is the point at which you agree to purchase the property and the terms of the sale are agreed upon. Typically you pay at least a 10% down payment (sometimes up to 30%) when you sign the contract. If the seller backs out, the deposit will be returned. If you as the buyer back out, you will lose the deposit.
Sign the “Escritura de Compra e Venda”
Escritura de Compra e Venda is the final deed of sale. Before everything is finalized, you’ll need to ensure that you’ve paid the remaining down payment (based on the terms of the sale), as well as a number of associated fees and taxes, including:
- Imposto Municipal sobre Transacções Onerosas de Imóveis - IMT property transfer tax: which can be anywhere between 0-8%, scaled depending on the value of the property and whether you will live there or rent it out.
- Imposto sobre o Valor Acrescentado - IVA value-added tax - VAT: which is usually included in the purchase price.
- Lawyer fees: Sometimes a flat fee, other times a percentage of the value of the property.
- Notary fees
- Land Registry fees
- Mortgage fees
- Agent fees: These are usually paid by the seller.
It is usually recommended that you budget around 10% of the value of the home in fees, but this can vary quite a bit.
Home Sweet Home!
Finally, it’s time to move in! The next important step will be to start contacting water, gas, electricity, TV, and internet providers to set up services or change the name on the existing account.