How to buy property in Portugal

Step-by-Step Guide

Regardless of your current residency and nationality, it would be smart to stick to this scheme:

1. Decide on what you want. Do you consider buying a villa or an apartment? What's your budget? What's your dream location within the country? Are you planning to relocate here permanently or will it be your holiday property? Will you be using it yourself or will you be renting it out at least from time to time? Carry out thorough online research and compose a list of options that you'd like to inspect in person.

2. Visit the properties from your list. Do they live up to the information that was provided in their ads? How easy is it to get there? Do you like the surrounding area and its infrastructure? If possible, try to check the property in different seasons and at different times of the day. Talk to locals and let them express their impartial opinion about the area.

3. Think of the legal and financial aspects. How are you planning to transfer the funds to the property's developer or previous owner? If you have to convert a foreign currency into euros, how can you find the best exchange rate? Do you need a mortgage — if yes, for how long? Think of any extra costs that your deal might involve — we'll mention most of them in this article. Additional expenses might amount to up to 20% of the property's price — but around ⅓ of this sum should be covered by the vendor.

4. Make an offer. Ask the vendor whether they could agree on a lower price than the one that was indicated in the property's ad. Discuss what's included in the price — probably, the vendor will be ready to pay some part of the fees. After you agree on all the aspects of the deal, it will be time for you to place a deposit to buy the property. That's necessary to confirm that you have serious intentions. 

5. Double-check the legal status of the property. Immediately before the purchase, make sure the house or apartment that you're about to buy has all the required licenses and permits. It's important that you don't have to pay the bills and debts of the previous owner.

6. Sign the promissory contract of sale. Normally, this is done two weeks after depositing the first portion of the money. In this document, both parties involved confirm their intentions and outline the conditions of their deal. Be ready to add around 30% of the property's price to your deposit. If you change your mind after signing the promissory contract, the seller won't give you this money back.

7. Sign the public deed. You'll need to do it in front of the local notary, on the date that was indicated in your promissory contract. Then, transfer the remaining funds to the vendor.

8. Register your property in the Land Registry and become its rightful owner.

To successfully complete all these steps, it's vital to hire local advisors and consultants. They need to speak fluent English if you are not good at Portuguese. It's important that they have experience in working with clients of your type — that is, from your country, with your budget and with similar requirements. If you can't be present in Portugal during all the stages of the deal, let the lawyer represent your interests.

Real Estate Market Perspectives

In the last couple of years, the European real estate market hasn't been flourishing. It hadn't yet recovered from the crisis caused by the COVID-19 pandemic when the Ukrainian conflict broke out. The good news is that the Portuguese market copes with the current challenges much better than its regional counterparts.

According to the research delivered by Moody's, in 2023, the prices for accommodation might drop by up to 8% in the UK and the US. In Germany, they're expected to decrease by up to 4% — while in Portugal, by a maximum of only 4%. Meanwhile, in 2022, the cost to buy a property in Portugal rose by nearly 14%. So 2023 seems to be an optimal moment for investing in real estate in this country.

The upcoming decrease can be provoked by soaring inflation, which is typical of all the European states now. As a result of inflation, mortgage interest rates are likely to keep rising — so make sure to invest time and effort into searching for the most lucrative options.

Golden Visa

If you can afford to buy a house, apartment or land in Portugal that costs around half a million euros, you can apply for the Golden Visa. After you get it, you'll be able to enjoy the following privileges:

• Apply for local citizenship in five years

• Travel to over 180 countries without a travel visa

• Benefit from a lucrative taxation scheme

• Access free public services, including education and healthcare

You'll be allowed to apply together with your relatives:

• Spouse

• Your and your spouse's dependent parents

• Underage children

• Dependent children who have come of age but haven't tied the knot yet

• Sons and daughters aged 25 or younger if they're studying full-time

• Underage siblings in your or your spouse's custody

Every two years, you'll be required to spend only two weeks in Portugal.

The Golden Visa is issued to individuals who have invested the following sums of money in the following varieties of properties situated in the following types of locations:

Only selected buildings officially require renovation. They need to be at least 30 years old or be located in areas that need regeneration. If you don't know how to handle the repair work, this option might incur a lot of unexpected expenses for you, so you'd better avoid it.

Alternatively, you may invest in local culture or science, open a business in Portugal, buy shares of local companies or transfer a large sum of money to your account in a local banking institution. All these steps can help you get a Golden Visa without buying a property. But won't you need to stay somewhere when you visit this country? Buying a house or apartment seems the most logical way out. Plus, it's the least complicated method. For instance, if you prefer to invest in culture, it might take many months to find the right object. You can't support any random cultural endeavor of your choice.

Which Area to Opt for

Expats particularly love the following locations:

• Lisbon. A vibrant cosmopolitan city you can live comfortably without speaking Portuguese.

• Cascais. A quiet seaside place located not far from the capital.

• Porto. Lively city with a steadily high demand for properties for rent.

• Coimbra. A haven for fans of history and culture. Situated between Porto and Lisbon.

• Algarve. Seaside area with gorgeous beaches.

• Silver Coast. More budget-friendly than Algarve and incredibly popular among tourists in summer.

• Alentejo. Charming rural area with affordable properties.

• Chaves. Mountainous area situated in the North of the country, close to Spain.

• Madeira. An island with a subtropical climate all year round.

• Porto Santo. A lesser explored by tourists and a cheaper alternative to Madeira.

When buying property in Portugal, you should be aware of an important restriction. Residential real estate in the most popular and densely populated areas of the country, namely in Lisbon, Porto and other coastal cities, won't grant you the Golden Visa. You'll get this type of visa only if you invest in residential properties located outside of the capital and most developed areas or the ones in Madeira and the Azores. Alternatively, you can buy commercial properties in any region of the country. 

Mortgage for Expats

Portuguese banks eagerly provide mortgages to foreigners who invest in local real estate. It doesn't matter whether it's a residential or commercial property, a brand new or a second-hand one. The earlier you start researching for opportunities, the better.

You'll be able to select from two types of rates: variable or fixed.

• The variable type is more common. The more funds you borrow, the higher the rate. If you lack 30% of your purchase's price, the variable rate might be as low as 3.3% per year. The exact number will keep fluctuating on a monthly basis. Just to compare: if you want the bank to provide you with 70% of your property's cost, the fixed rate can be around 4.1%.

• The fixed type doesn't suggest any fluctuations. If you realize that you'd like to switch to the variable type after your mortgage has already been approved, you might be allowed to do so if it's a short-term loan. Yet it's not uncommon for expats to ask for 30-year-long mortgages — and in this case, it would hardly be possible to change the type of rate.

No matter which type of rate you opt for, you'll be charged a fine if you decide to pay back the debt earlier.

It's not by chance that we mentioned the numbers "30% and 70% of the property's purchase price". It's the standard range of approved mortgages. Some lucky individuals manage to secure a loan of 90% of the purchase price — but that would be a rare exception.

To apply for a mortgage, an expat needs to prepare the following papers:

• Copy of passport

• Portuguese tax number

• Proof of income

• Proof of having enough funds

• Bank statements for the last 90 days

• Bank reference letter

• Household bill or another document that can prove the address of their residence

• Recent mortgage statement

• Sales contract for the property or a signed agreement that proves their purchase commitment

If you work for an employer, add to the set of documents these papers:

• Payslips for the last 90 days

• Last year's tax returns

• Reference letter from the organization that you work for

Self-employed individuals or those who own 20% or more share in a limited company provide the following documents:

• Business bank statements for the last 90 days

• Last year's tax returns

• Three years of their business profit and loss and balance sheet

People who rely on other sources of income show to the bank these papers:

• Copy of investment certificates

• Statements that prove that they received the rent in the last three months

• Copy of tenancy agreement for rented houses, apartments or commercial properties

• Proof of pension income for the last 90 days

This list might not be exhaustive. The banking institution that will be considering your mortgage application has the right to ask you to provide additional documents.

To apply for a mortgage, you should follow this scheme:

1. Find a bank or a mortgage broker whose conditions you like.

2. Ask them for a quote, pay for it and receive it in a couple of days.

3. Submit the application form and the accompanying documents.

4. Receive the formal offer.

5. Let the bank evaluate the property that you'd like to invest in.

6. Transfer the money to the appropriate bank account to prove that you can afford the purchase.

7. Wait until the bank provides the mortgage to you.

Don't forget to factor in the following expenses:

• Up to €500 for the property valuation

• Up to 0.5% of the loan amount for the bank application fee (usually paid only if the mortgage is approved)

• Up to €1,100 for the bank's other fees

• Up to 2% of the property's purchase price for the lawyer's services

• Up to 6% of the property's purchase price for the notary fee

• 0.6% of the mortgage amount for the stamp duty

• Around €300 for the advisor's assistance (you'll get this money back after completing the mortgage procedure)

If you apply for a mortgage, you would fail to obtain the Golden Visa. However, there is one exception. Let's imagine that you buy an expensive property that costs more than the minimum required investment threshold for getting the Golden Visa. Then, you can pay the minimum required threshold out of your pocket and ask for a mortgage for the remaining part. In this case, you'll qualify for the Golden Visa.

After Brexit

If you're a UK resident, you have the full right to purchase a holiday home in Portugal. You're allowed to stay in this country without a visa for a maximum of 90 days every 180 days. If you'd like to live here permanently, it shouldn't be a problem to get a visa. UK expats appreciate this country first and foremost for its warm and sunny climate as well as the cost of living, which is much more affordable than in their homeland.

Those who get passive income in any form in the UK can apply for a D7 residence visa. Its target audience is retirees and individuals who get regular passive income from their investments. The main thing is to prove that you won't be looking for a job in Portugal or claiming any benefits from the local government. This said, it isn't a problem for British expats to register for local healthcare services after they become Portuguese residents and get a tax identification number.

If needed, you'll be able to get a mortgage on the conditions that were described above.

Taxation

Those who're dreaming of becoming real estate owners in Portugal should be aware of these taxes and fees:

This table features only the maximum possible numbers. Probably, the taxes that you'll need to pay in fact will be much lower. For instance, the capital gain tax for non-residents is 28% flat.

The exact rates of many taxes depend on the location of the property and the fact whether it's the primary or secondary residence of its owner.

Paperwork

While still in your homeland, be ready to prepare:

• Valid passport

• Schengen visa, if your current jurisdiction requires it

• Documents to prove that you have always been law-obedient

• Papers to prove your current residence (a household bill would do)

• Letter from your employer or documents that confirm that you run your own business

• Papers that prove your connections to the family members who apply together with you (such as your kids' birth certificates and your marriage certificate)

In Portugal, you should obtain:

• Tax identification number (appoint a local tax representative to help you get it)

• Proof that you have no debts related to paying your insurance and taxes

• Evidence that you have transferred some part of the property's price to the vendor

• Signed statement that confirms your willingness to meet the investment requirements

• Your permission for the authorities to access your criminal record

• Confirmation of the fact that you have paid the application fee

The papers that you obtain in your homeland should be translated into Portuguese by an accredited professional and apostilled.

Guides to buying real estate in other countries:

• Buying property in France
• Buying property in Greece
• Buying property in Cyprus
• Buying property in Spain