Buying a Home in Portugal

View of Carvoeiro fishing village with beautiful beach, Algarve,
The unseasonably warm weather has finally gone and everything is starting to feel very autumnal. So what better subject for this month’s hot topic then sunnier climes – and buying a holiday or investment property in Portugal.

Portugal has long been one of the most popular destinations for Brits – and others – buying abroad, but coronavirus has only added to its appeal. New registrations at Fine & Country estate agents were up a third in the four months to July compared with 2019, even though travellers to Portugal must currently self-isolate for 14 days on their return to the UK.

It’s easy to see why it is so popular, with its many sandy beaches, great food, easy access from the UK and the fact that English is so widely spoken. The Algarve, which is a favourite destination of the British, is close to Faro airport, with regular, short flights to London. There are plenty of golf courses, sports clubs and beach clubs, so there is plenty to attract holidaymakers should you choose to rent out your property at least some of the time.

If you are taking it a step further, upping sticks and moving to Portugal, there are tax advantages for doing so. Portugal’s non-habitual residence tax regime means those moving there will find that much of their foreign-derived income, such as dividends, is tax-free for the first ten years of residency. Pension income is taxed at 10 per cent, while foreign employment income is taxed at 20 per cent.

There is also the potential for a Golden Visa post-Brexit from 1 January in countries such as Portugal, as Brits will then be viewed as non-EU citizens. This is a permanent residency visa for those who invest, by purchasing property, a certain sum of money in a country. In Portugal, this requires an investment of €500,000 (or €350,000 reduced option for a property requiring renovation) in real estate, gaining a residency permit for a family including dependent children. There is no need to actually reside in Portugal either; the Golden Visa can be renewed every two years as long as the applicant and their family spend a fortnight in Portugal ever two years.

The Portuguese residency card granted through the golden visa programme enables the holder to travel through the Schengen Area, a zone of 26 European nations which have abolished their internal borders with each other allowing free and unrestricted movement.

Those buying in Portugal will find that the mortgage model is quite straightforward and with few exceptions lending is on a repayment basis. Lenders are happy for you to rent out your property, with the borrower’s financial position determining the loan size regardless of potential rental income. Long-term fixed rates are common with rates some of the lowest we have ever seen. The maximum loan-to-value in Portugal is around 70 per cent so you will need a decent deposit.

At AWS Financial Services we can advise you on mortgages for buying property in Portugal, as well as other countries. We know which lenders to approach to obtain the most attractive terms, whether they are UK-based or in the country you are buying in, so do get in touch for more information.

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