finanças
Is a 100% mortgage possible in Portugal?
Wondering if a 100% mortgage is possible in Portugal? Let’s explore how you can make it happen!
For many potential homebuyers, securing a mortgage with 100% financing sounds like the ultimate solution, especially when saving for a down payment is a challenge. But is it truly possible to obtain a 100% mortgage in Portugal?
While mortgage lending rules have evolved in recent years, there are still paths to securing full financing, though not without some critical considerations. Let’s explore what options are available and what factors come into play.
What is a 100% mortgage?
A 100% mortgage, a loan where the bank finances the entire property value, was once a common practice. However, securing such a mortgage in Portugal has become a rare and unique opportunity due to regulatory changes, making it a significant achievement for those who qualify.
How realistic is a 100% mortgage in Portugal?
Since 2018, banks in Portugal are required by law to finance only up to 90% of the property value. This means that a down payment of at least 10% is necessary for most people.
- Standard rule: generally, banks only offer financing for up to 90% of the property’s value. The remaining 10% is expected to come from your savings
- Property type: if the property is a second home or an investment property, the financing limit typically drops to 80%, requiring a higher upfront contribution.
Public Guarantee for young adult
Young buyers under 35 can benefit from government-backed financing for up to 100% of the property price, provided they meet specific criteria, such as having a stable income and a good credit score. It's important to note that this financing is only available for the purchase of a primary residence and cannot be used for second homes or investment properties. This initiative is designed to make homeownership more accessible to young people who are facing rising property prices.
Bank-owned properties
There is another exception if you’re buying a property owned by the bank (often referred to as a “bank-owned property”). In this case, the bank may be willing to finance the full value of the property, as they are keen to sell these properties and recover their losses from repossession.
Why do banks offer this?
These properties are typically those that the bank has repossessed after the original owner defaulted on their mortgage. Banks may be more inclined to offer 100% financing to reduce their loss from repossession and sell the property quickly.
100% mortgage: advantages and disadvantages
Advantages
- No upfront payment: the most obvious advantage is that you don’t need to save a large deposit. This can be especially helpful if you struggle to come up with the typical 10% required
- Access to property sooner: if you don’t have a lot of savings but need to buy a home, this can help you get into the property market faster, especially in high-demand areas like Lisbon and Porto.
Disadvantages
- Higher risk for lenders: since you’re borrowing the property's full value, the bank takes on a significant risk. This can result in higher interest rates or stricter conditions for approval
- Limited availability: 100% mortgages are rare and usually only available for bank-owned properties or under special government initiatives
- Potential for financial strain: without an initial deposit, you might be stretching your finances further, making it harder to deal with unexpected expenses or market fluctuations.
The information provided isn’t a substitute for consulting public or private experts in each area.
