Learn about the mortgage conditions for foreigners in Portugal and the available tax benefits.

The first step to buying a home in Portugal is to request a Portuguese tax number (Número de Identificação Fiscal – NIF), even if you are purchasing a property purely as an investor. You must register with the local tax authority or tax office and appoint a tax representative in order to buy the property.

What are the main differences for a Portuguese vs. a foreign client?

Mortgage conditions for a foreign citizen differ very little from those applied to Portuguese citizens, but in some cases they are more restrictive. The banking sector is subject to strict anti-money laundering rules and must ensure that foreign clients’ transactions fully comply with the law.

The differences in granting mortgage credit to foreign citizens are also linked to the greater difficulty in dealing with a potential breach of contract by these clients, as it is harder to take effective legal action—especially in the case of non-residents. In this type of loan, the main collateral is usually only the property being financed.

What is the maximum financing term for foreigners?

As a non-resident in Portugal, banks may grant you a loan of between 60% and 80% of the property value, and the financing term is generally up to a maximum of 30 years, provided the borrower’s age does not exceed 75 years by the end of the loan. These mortgage limits may vary depending on the bank.

Are interest rates and fees the same for Portuguese and foreign clients?

Interest rates and fees are similar for domestic and foreign clients, but sometimes the documentation required for a loan application is more demanding in the latter case.

Regarding financing options, both variable rates (based on the Euribor index plus a spread) and fixed rates (with constant instalments over a certain period or throughout the entire term of the loan) are generally available. The permitted debt-to-income ratio also varies from bank to bank, but in most cases it is limited to 30% to 35% of the household’s monthly income.

Does the country of origin influence loan approval?

Yes. The country of origin can influence mortgage approval. If you are a European citizen, it may be easier, but the contract conditions are determined by several factors such as the clients’ financial profile, the property characteristics, and the lending policy of the credit institution.

What are the costs of a mortgage for foreigners?

Taking out a mortgage as a foreigner involves a number of additional costs, such as taxes, expenses, and fees, which together may amount to around 10% of the property price.

Do foreigners working in Portugal have tax benefits?

Portugal can be a very attractive destination for foreign “digital nomads” who work remotely and choose to live in a country different from the one where the company they work for is based, enjoying a higher quality of life.

To encourage foreigners to move to Portugal, the Non-Habitual Resident (NHR) status offers a more advantageous tax regime for those who establish tax residence in the country or who receive pensions from abroad. Anyone who meets the following requirements can apply:

• Be a foreign or Portuguese citizen;
• Have had tax residence outside Portugal in the five years prior to the application;
• Establish tax residence in Portugal;
• Have education or professional experience of high added value. The professions are listed and range from doctors, journalists and scientists to football players.

The registration request as a Non-Habitual Resident can only be made once you are registered as a resident in Portuguese territory. Therefore, if you already have a Portuguese tax identification number (NIF) but are still registered as a non-resident, you must first request a change of address and status to resident at any Tax Office (Serviço de Finanças) or Citizen Shop (Loja do Cidadão). You may also request this status electronically via the Tax Authority Portal (Portal das Finanças), but it is important to pay attention to the deadline: you can only apply until March 31st of each tax year.

Non-Habitual Resident status grants tax benefits for ten years, provided that during each of those ten years you are always considered a resident taxpayer. Over that period, Non-Habitual Residents enjoy several tax benefits:

• A 20% personal income tax rate on employment and self-employment income, if it arises from a profession considered of high added value with a scientific, artistic, or technical nature;
• A 10% personal income tax rate on pension income for those registered after March 31st, 2020;
• Even with these benefits, workers must bear in mind that if they remain in Portugal and work remotely for other jurisdictions, in general Social Security contributions are due in Portugal.

If you are a foreigner and are thinking about buying a home in Portugal, it is advisable to rely on specialists who can support you throughout the application process and help you understand the terms used in Portugal relating to mortgages. Use a credit intermediary such as MaxFinance, who will help you understand the conditions being offered to you.