12 steps to follow to buy a house in Portugal

Buying a Portuguese property can be like finding your way through a maze, but not with this guide.

Buying a house can be a real headache, whether it’s your first time or you’re an old hand. Ever ready to help, this article guides you through the 12 simple steps you’ll need to follow to buy your dream house in Portugal.

 1. Get your budget straight: First of all, you have to work out how much you can reasonably spend on purchasing your new Portuguese property and how much you’ve already got saved up. A good guide based on your monthly earnings is that your budget should not exceed 35%-40% of your net monthly income.

 2. How will you pay? There are three main options when it comes to paying for your house:

One-off payment: In Portugal, known as Pagamento a pronto, it involves paying the whole sale price of the property to the seller in one go, normally via a bank cheque in their name that you hand over when you sign the deed.

Mortgage loan: Getting a mortgage, either from a Portuguese bank or one at home, using the property itself as a guarantee against defaulting, is a more common option than a one-off payment. Depending on your age and certain other characteristics, payment terms can be up to 40 years, with banks usually loaning 80% of the house’s sale price and the remaining 20% being paid from the buyer’s pocket.

Mortgage subrogation: If there is an outstanding mortgage on the property from the previous owner, you can change the name of the debtor to your own name, taking on all the rights and responsibilities and making you the new mortgage payer. You have to request this from the same banking entity as the mortgage already exists with; it can’t be a different one. One benefit of subrogating a mortgage is that it saves the costs of a new mortgage, but the downside is that the terms and conditions are fixed and you cannot adapt them to meet your needs.

3. Decide what type of property you want and where, whether that’s a new construction or a used home, free or protected, by the sea or in a town center. Choose the one that is best suited to your needs and personal situation.

4. Choose who to buy with. Once you know where and what you want to buy and how much you will spend, you can focus your search and be more productive. The sale conditions available and negotiating the price depend on the type of seller, so think carefully about whether it will be a private seller, a real estate agency, property developers or banks, as each have their own pros and cons.

5. Visit the property, chat with the neighbors and find out everything you can. When you go to visit your potential new house, be sure to take notes about everything, taking photos of anything and everything. Take measurements and consider the room layout, which direction the property faces, how much light comes in, the ventilation in the bathroom and kitchen, the state of the wiring and how energy efficient it is, how noisy it is and the amenities available in the neighborhood… in short, be thorough when you first visit a place!

 6. Make an offer (they can’t refuse):

Look through the Property Registry to find out all the details of the property and make a suitable and sensible offer based on this.

Be sure that your mortgage is in place to be able to make that offer.

Give the property one last look over, just to be sure, before making your offer.

7. Sign the deposit agreement (contrato de promessa de compra e venda). This is the first contract to sign and it acts a sort of preliminary safeguard for the buyer’s and seller’s rights. It means paying a 10% deposit on the house, and with this you take on all the rights and responsibilities of a buyer. If you as the buyer later decide not to go through with the transaction, you will lose this down payment. If the seller is the one who cancels the sale, though, they will have to return the deposit to you.

 8. Sign the title deed. The signing of the deed must be done in front of a notary with both the buyer and seller present. Ensure that the deed contains a description of the property along with any outstanding mortgages or charges on the house, the sale price and the payment method, and all taxes and expenses related to the sale. You should also take this opportunity to check that all the documents are present and correct, like the Energy Performance Certificate, insurance if applicable, and invoices for the latest tax and community cost payments.

 9. Pay the transaction costs and taxes. The main expenses when buying a home in Portugal are the IMT Property Transfer tax, VAT and Stamp Duty, not to mention the notary costs, the payment to register the transaction with the Property Register, anything owed to the estate agent if you have used one and any costs related to the mortgage.

 10. Change the name on the energy, water and gas bills. Inform the energy companies and any other services providers that you are the new owner and will be paying the bills from now on.

11. Keep all the documents. Put them somewhere safe and don’t lose any of it! You’ll need them again one day when you come to sell or rent the house.

12. Get the keys and start moving in to your brand new home!