Buying a property in Portugal marks the start of an exciting new life in the sun. Whether a holiday home, retirement or investment, it should be no more problematic than a purchase in your home country.
However, the process may feel a little intimidating at first, especially if you’re unfamiliar with the language, currency and bureaucracy.
This article lays out the basics, so you’ll know what to expect. Of course, there will be variations, and you should always speak to a reputable and specialist property lawyer before committing any money.
That said, 10 simple and logical steps should ensure a safe and smooth property purchase in Portugal:
1. Check your finances
Most property buyers in Portugal use a combination of funds – savings, a pension lump sum, cashed in investments, selling a UK home – and others.
It is always best to be completely realistic when calculating how much you have to spend abroad and when it will be available to spend. There is nothing more heart-breaking in overseas property (for you or the estate agent) than finding the Portuguese property of your dream then realising you can’t sell your UK buy-to-let portfolio in time.
As well as checking the source and availability of funds, register for a free account with Smart Currency Exchange. A quick chat with your designated trader there with explain how exchange rates work when making a major purchase overseas. Spoiler alert: it’s a bit more complicated than getting your travel cash, and with different risks, but nothing to worry about.
If you need a little extra cash, you have several options. If you’re a non-resident, a Portuguese bank will usually offer you a maximum of 70% Loan to Value. As such, you can expect to need a 30% deposit.
Residents can usually borrow up to 90% LTV. Becoming established in a rented home prior to purchasing a property – with the necessary visas and residency – may provide a route to getting a mortgage with a lower deposit.
For those keeping their main home in the UK, equity release or lifetime mortgages are another option.
2. Find Trusted Partners
Buying a property in Portugal means working with various third parties. Finding people you trust is key.
For example, choose estate agents and currency exchange brokers after doing your own due diligence, working with reviews and personal recommendations.
Similarly, you will need legal advice for purchasing in Portugal. While you may be encouraged to use a specific solicitor recommended by an estate agent, it’s best to engage somebody yourself – on recommendation. That way, you know they’re looking out solely for your interests.
Call the resource centre at Your Overseas Home, available on 0808 252 7870, for recommendations.
3. Arrange a Viewing Trip
There’s plenty of Portugal to choose from, but not so much that you should be paralysed by the choice.
Once you’ve got the basic area decided, the next step is to arrange a viewing trip to Portugal. There are several variations of viewing trips, ranging from subsidised tours of specific resorts to self-arranged trips where you have full freedom to look wherever you want.
A sensible happy medium is to arrange a trip together with a trusted estate agent. They can line up several properties and help you find your feet in the area(s) of your choice.
Read much more about planning your viewing trip to Portugal here.
4. Obtain a Fiscal Number
A Portuguese fiscal number (Número de Identificação Fiscal) is essential for almost every kind of financial and legal transaction in Portugal.
It’s worth obtaining one at the earliest opportunity, as you will certainly need one before you can rent or buy a property. Thankfully, of all the paperwork in Portugal, it’s usually the easiest to obtain – even as a non-resident.
Agencies exist that will assist with obtaining your NIF, but you can do it yourself by attending a Camara (town hall) with proof of identification and address. It’s worth doing this during a holiday or viewing trip.
5. Allow for Fees
As in any country, there are fees associated with buying a property in Portugal. It’s essential to be realistic about these, and about how they could affect your overall budget.
Fees can range from 5 to 10% of the property purchase value. Assuming 10% is a sensible strategy, allowing for pleasant surprises rather than nasty shocks.
- Stamp duty (Imposto do Selo).
- Notary fees.
- Solicitor’s fees.
- Property registration fees.
- Lawyer’s fees.
- Survey fees.
- Mortgage related fees.
6. Make an Offer
Once you’ve found your perfect home in Portugal, it’s time to make an offer via your agent, who can then help you with any follow-up negotiations and counteroffers.
Prior to making an offer, it makes sense to speak to your chosen currency broker to confirm the real-life cost of the property in your local currency.
7. Arrange a Survey
Property surveys are not mandatory when buying a home in Portugal. However, it’s generally a good idea to arrange one. It’s sensible to do this before you’re committed to buying and are in risk of losing any deposit.
You may be able to reserve the property (as below) with the sale dependent on the outcome of the survey. However, be sure to consult your trusted lawyer before doing this.
8. Reserve the Property
Once your offer is accepted, you will need to pay a deposit. At this point, the sale process begins, and the property is taken off the market.
Usually, the reservation deposit is around €5-6,000. Rather than being handed over, it’s normally lodged with your own solicitor. At this point, the solicitor also begins basic checks, such as verifying the legitimacy of the property ownership.
9. Sign the Promissory Contract
A promissory contract (Contrato Promessa de Compra e Venda) is the next stage of the buying process. It is legally binding and lays out all of the key details of the sale. These include the seller and buyer details, terms of payment, and specific details of everything included in the sale. The contract generally includes an estimated date for the completion of the sale.
Usually, the promissory contract is signed within a few weeks of the reservation being made. As with with the escruitura (see below), this is a document that must be signed in the presence of a notary.
At this stage in the process, you generally pay an agreed deposit of around 30% of the purchase price.
If you’re not living or staying in Portugal while all of this is in progress, it’s possible (and perfectly routine) for these documents to be signed on your behalf by a power of attorney. Obviously, you should make sure that this is somebody you trust implicitly.
10. Completion (Escruitura) – and Final Formalities
The signing of the escruitura is the equivalent to “completion” in the UK. This is the public deed, which confirms ownership of your new home. The balance of the purchase price is transferred, with everything done in the presence of the notary.
At this point, you pay the property purchase tax (IMT). Checking this tax has been paid is part of the notary’s remit.
With that complete, it’s time to get the keys and take the customary first photo by your new front door!
Following the signing of the escruitura, you must be registered at the land registry (Registo Predial) as the new owner. Your lawyer will usually complete this process. You will also need to notify the tax office, and deal with the connection of utilities.
Purchasing a home in Portugal can prove straightforward if you have the right people on your team. Take the time to find companies and individuals you trust, and the process can prove smooth and pleasurable.