If you’ve fallen in love with Portugal, you may have decided that it’s time to buy a property here. That might be a second home that you’ll visit occasionally, a rental property that you’ll use as an investment or a house or apartment that you’ll make your main residency.
Buying in Portugal is similar to many other countries, perhaps with the exception of how the promissory contract (CPCV) works. Another issue is the potential legal and structural pitfalls you need to be aware of (for example: swimming pools and parts of the property may not be completely legal and some properties may have been built on land that’s not designed for residential use). Most first-time buyers have no problems, but it’s always a good idea to work with a lawyer and to consider working with a buyer’s agent as well.
The property buying process:
Research properties & find one you like;
Attend viewings;
Put in an offer;
Sign the CPCV or promissory contract
Both parties come up with their terms for the promissory contract, which could involve terms like the deal is contingent upon the survey not bringing up any serious problems. It also includes details about both parties and when the date for signing the “escritura” is likely to be. At this point, the buyer will typically pay a 10% deposit, which is non-refundable if the buyer backs out. However, if the seller backs out, the buyer has to be paid double.
Await the bank’s decision and mortgage evaluation (if applicable)
If you’re getting a mortgage, the bank will normally need to visit the home as part of their valuation.
Pay the IMT and IS, arrange home insurance, and transfer the utilities
Just before you sign the deeds, which takes place in front of a notary, you will normally need to pay the IMT and IS. Home insurance is also recommended, and typically a requirement if you’re getting a mortgage. It’s also a good idea to begin transferring the utilities.
Sign the deeds & pick up the keys to your new home
The deeds or “escritura” are signed by both parties. The buyer pays the remaining balance and the seller hands over the keys. There are still some small tasks that need to be done – the property needs to be registered into the Land Registry (Registo Predial) and with the local tax office (Finanças), for example, but often a lawyer can help with these or at least point you in the right direction.
Cash buyer?
If you’re a cash buyer, this step will be easier: just take the full amount and be sure to allow around 6-8% for purchase fees. For example, if you’re looking for a property that costs around €500k, be sure to allow between 6% and 8% (or between €30k and €40k) for fees.
Need a mortgage?
If you’re likely to need a mortgage, it’s best to get a quote from a mortgage broker. You can speak to a Portuguese bank either, but the benefit of speaking to a broker is that they can easily compare the whole of the market and give you a better idea of what’s possible. (Note: most banks won’t offer mortgages on properties overseas, so you will need to get your mortgage through a Portuguese bank).
If you just want a starting point, residents (those that live in Portugal) will typically need a deposit of between 10% 20%, and non-residents (those that don’t legally live in Portugal) will typically need a deposit of around 20% and 30%. It’s sometimes possible to get lower rates, but as a safe estimate, residents should assume they’ll need around 28% in cash as a downpayment while non-residents should assume they’ll need around 38%.
That’s just one part of the mortgage puzzle, however. The broker will also need to assess how much you can afford to pay back per month, taking into account your earnings, current monthly outgoings, and the mortgage term. As a general rule, your fixed outgoings (e.g. other mortgages, credit card repayments, etc.) cannot be greater than around 35% of your net income.
This means that if you earn €1,000 per month after tax, your fixed outgoings, including this mortgage, cannot be more than €350 per month. It’s slightly complicated which, again, is why it helps to work with a broker.
EU/EEA/Switzerland
Those from the EU/EEA/Switzerland aren’t subject to the Schengen Visa rules. However, after spending three months in Portugal, you should apply for residency. In practice, many, including many that own properties in Portugal, don’t as this is rarely monitored, but the law does state that you should.
Rest of World
Those in the rest of the world (such as the UK, USA, and Australia) are typically subject to the 90/180 Schengen Visa rule, which means that you can spend 90 days in the Schengen Area in every 180 days. This potentially means you could come for two three month stints per year, which for many people is more than enough time. If you want to stay for longer, however, you’ll need to consider applying for residency.
For those from outside of the EU/EEA/Switzerland, obtaining residency means applying for a residency visa such as the D7 or golden visa. The golden visa is worth considering at this point as one of the routes to qualifying for the golden visa is through purchasing an eligible property.
If you decide you like a property, you can then come back and really start to assess whether it’s a good buy or not. You can also ask for important documents like the energy certificate, recent utility bills, and condominium minutes, if the property is an apartment. Your lawyer can also begin looking at other documents, such as the Certidão de Teor (Land Registry Certificate) and Caderneta Predial (Title Certificate) to make sure there are no legal or financial issues to be concerned about.
At some point, you may want to arrange an inspection. Traditionally, this isn’t the norm in Portugal, but it is common among expats. If you’re getting a mortgage, your bank will also want to visit the property, although they may not do this until after you’ve signed the promissory contact or CPCV.
There are a few things that you can expect to happen at this point:
- If you’re buying the property with a mortgage, the bank will normally visit the property at this stage
• You will need to pay the taxes: Imposto Municipal Sobre as Transmissões Onerosas de Imóveis (IMT) and Imposto do selo (IS), which is the property transfer tax and stamp duty
• You (or your lawyer or buyer’s agent) should notify the utility companies that you’re taking over the property
• You may want to request a final check of the property
• You should arrange the final payment, which is normally paid as a banker’s draft (and which you’ll normally have to ask the bank to arrange in advance)
The Escritura
Although there are one or two small tasks, the big final task is to sign the deeds or Escritura. This is where you will hand over the final payment and the seller will hand over the keys.
This exchange normally takes place at the notary’s office and unless you or the buyer are being represented by your lawyers through power of attorney, it’s common for both the buyer and seller to be present along with each party’s lawyers.
The Escritura will be read aloud (in Portuguese) and both parties can comment and confirm that they’re happy and that any terms placed in the promissory contract have been met. You will need a translator if you don’t speak Portuguese, although this could be your lawyer if you’re happy with that.
Final steps
Now that you have the keys, you’re ready to move into your new home.
There are still a few things that you will need to do, such as:
• Register the property at the local Conservatória do Registo Predial (Land Registry Office) and Finanças (local tax office)
• Make sure you have a copy of important documents like the escritura, energy certificate, and land registry certificate
• Update any banks, companies, or government bodies with your new name and address
• Register your mailbox (or buy one) if it’s a house in a rural location