In the world of real estate, there's an interesting prospect that can make the dream of home ownership more accessible. This elusive concept would enable buyers to acquire property without having to save a substantial down payment. An often daunting task. While this financing option may seem too good to be true, there are indeed ways of obtaining a 100% mortgage in Portugal, under certain circumstances.
Reminder of standard financing conditions
Before diving a little deeper into the existing solutions, it's important to remember that since 2018, the Bank of Portugal no longer allows banks to finance a property 100% through a home loan.
The current conditions are as follows:
- Up to 90% financing on a principal residence
- Up to 80% financing for second homes
Regardless of the bank. It is not possible to depart from this rule. If you'd like to find out more, feel free to check our services as mortgage broker in Portugal.
However, there are ways of obtaining 100% financing. Let's take a look.
The different solutions to get a 100% mortgage in Portugal
1st solution: buying a 2nd house
If you’re planning to buy a 2nd house, you may be eligible for 100% financing. The plan is to use your first property's value as leverage. But there are two requirements:
- You must take a mortgage on that first home to free up funds.
- The mortgage amount has to be greater than the purchase price of the second home.
Of course, this does not exempt you from the classic eligibility criteria for a mortgage. The bank will assess your financial capacity to manage two loans simultaneously. Also, to place a new mortgage on your Portuguese property, it must be credit-free. Or that the outstanding balance is sufficient to accept the mortgage. So it's not an option available to everyone, but it does exist.
By opting for a second mortgage on your current property, you offer additional security to the lending institution.
2nd solution: property seized by the bank
100% mortgage is a rare product in the real estate sector. It allows you to purchase a property in Portugal without having to make a down payment. One of the solutions to consider to get to 100% is to acquire a property seized by a bank. But how does this work, and what does it involve?
Banks can repossess property due to the former owners' inability to meet their mortgage payments. These properties become opportunities for potential buyers. Here's why they're often linked to 100% mortgage offers in Portugal:
- Banks “destocking”: Financial institutions are not in the business of holding or investing in real estate in Portugal. Rather, they are interested in getting rid of them. This makes them more inclined to offer attractive mortgage terms.
- Attractive for first-time buyers: If you're a first-time buyer, the prospect of a 100% mortgage on a property seized by a bank can be particularly attractive. It removes the hurdle of having to save a significant amount of money in order to buy.
Before jumping at the chance to buy a home without a deposit, there are a few nuances to consider:
- Property condition: Seized properties may come with a history and a need for renovation. Consider the potential costs of bringing your new home up to standard.
- Limited choice: You can only choose from the bank's portfolio, which may not include your dream home in the ideal location in Portugal.
- Competitive market: These transactions can attract a lot of attention, so you need to be ready to act quickly and decisively.
How to secure a mortgage for seized-property
To qualify for a 100% mortgage, you must be financed by the bank selling the property. They offer lower prices and better conditions for buyers of their properties.
These properties are listed in several places:
- on partner real estate agent websites
- on real estate buying/selling/renting websites
- branches of financial institutions
- bank real estate websites
Please note that some banks may require the purchase of an additional financial product to facilitate financing. Conditions depend on your personal and professional situation.
You may also be interested to know which banks offer this option. Here are the ones we know of so far:
- CGD – Caixa Geral de Depósitos
- Crédito agrícola
- UCI
- Millennium BCP
- Bankinter
- Montepio
- BPI
- Santander
NEW: 100% financing for Portuguese first-time buyers under 35
After many years of not being able to finance a property at 100%, the Bank of Portugal could be taking a step backwards for first-time buyers.
Indeed, the property market has risen sharply in recent years, making access to home ownership very complicated for young Portuguese. In response to this problem, a decree is currently being studied to make it possible once again.
The conditions are still to be defined, as is the deadline for implementation, but the prospect of buying a main residence at 100% could soon become a reality again. Check our article on our Portuguese site: /blog/credito-habitacao-jovem-100-financiamento/
