A property should not be brought without a minimum of organization and preparation. You will go through different phases during the purchase process. Each requires choices to be made and steps to follow. Here is a guide on how to buy real estate while limiting risks.
Clearly defining the property that you want to buy is a step that should not be overlooked. The more defined your requirements and wishes, the more efficient you will be when searching for the ideal home.
The list of elements to consider can be rather long:
Whether you are searching on your own or through an estate agent or notary, the answers to the above questions will help you save time during the selection process. You may also be able to avoid unnecessary visits.
The answers to these questions are not always obvious, particularly if you are buying as a couple. You will need to find a compromise between both your personal wishes.
Have you now defined the house of your dreams, the one matching all your criteria?
You will be able to move to phase 2: determining your financial capacity.
House prices are very high. Before you start searching for the type of house that matches your criteria, you need to check if you have the necessary budget for this purchase.
In the article “How to finance the purchase of my house?”, we detailed the 3 main existing funding sources:
By calculating the amounts available to you through these three sources, you will get a clear idea of your budget.
To increase your financial resources and learn how to reduce their cost, use our guides to improve the financing of your real estate.
At this point, you now know what you want, you know how much money you have available for this purchase, you must now find out as much information as possible on the real estate market of the town or the district you are targeting.
It is not easy for a foreign buyer to find financing for a property purchase in Portugal. Banks are often reluctant to accept this idea, the majority of cases this is due to the fact that they cannot mortgage property abroad.
The best solution is therefore to apply for a loan from a Portuguese bank.
That is why TAGUS PROPERTY works with partners who are used to this type of request and who help foreign buyers and investors to buy in Portugal.
OUR PARTNER BANK IN CHARGE OF LOAN APPLICATIONS IS ENGLISH-SPEAKING!
All your financial needs
Acting in a transversal way in all areas of financial services provision, as a bank for individuals, companies, investment, asset management and insurance, our partner ensures a wide coverage of our clients’ financial needs.
Advice, availability, all in English
By opening an account with our partner, you will have access to a dedicated English-speaking manager who works with you to find the best solutions to plan your future and manage your daily financial activity. Your new advisor has the tools and knowledge to give you the best advice on your investments. Always available, whether by phone, mobile or email.
APPLY FOR A LOAN / MORTGAGE IN PORTUGAL
Our partner offers mortgage loans to finance your real estate purchase in Portugal:
– Repayment period of the loan up to 30 years, maximum age of the borrower on the last maturity date: 75 years;
– Minimum contribution: 25%;
– Minimum loan amount: €75,000;
Contact us to find the best mortgage offers in Portugal
The process to buy a property in Portugal may differ from the process in your own country. The laws and regulations may be different. Without knowledge of this Portuguese process, you could be facing unexpected risks.
The procedure in Portugal is as follows:
Each step must be followed one at a time. We guide you through this process from beginning to the end. We will now explain each step one by one to give you a better understanding of this procedure.
Once you have found your ideal property, and your offer has been accepted, you can then reserve the property. This reservation is made with an amount of roughly €5,000 (depending on the value of the property).
This amount will be paid into an escrow account (owned by your lawyer) until the signature of the “CPCV – Contrato de Promessa de Compra e Venda” (preliminary contract).
If you do not reserve the property prior to the signature of the preliminary contract, it remains on sale. This reservation stops the sale of the property to any other interested party until the signature of the preliminary contract.
During this reservation period, your lawyer should look in detail at some aspects of the property in question (for example: existing mortgage, limiting clauses, required building warrants). It is important that your lawyer completes these checks prior to the signature of the preliminary contract so that the information you have on the property is up to date.
To prevent that the property from being sold to others, a reservation is a possibility.
If you decide to buy a property, you will need a competent lawyer. Your lawyer is responsible for particular checks on the property in question: has it been seized, are there limiting clauses, is a building warrant in place (if buying land). The lawyer also checks that the Local Urban Plan (PLU) for the property held at the “Câmara Municipal” (City Hall) correspond to the current situation.
This check must take place prior to the signature of the preliminary contract. This will prevent you from buying a property built without permit or under seizure.
It is possible to give your lawyer a “Procuração Pública” (power of attorney) detailing the conditions under which he can act on your behalf. If you have not arranged the power of attorney in Portugal, it can be arranged in your own country with a lawyer and the Portuguese embassy. We recommend that you arrange it directly in Portugal – it will be quicker and cheaper. Lawyers and legal fees vary generally from 1% to 1.5% (+ VAT).
If you need a recommendation for a lawyer, we will be delighted to help you.
The promissory contract will generally be signed within a month of the reservation. When there is an agreement on the price and the documents are approved, the two parties sign a “CPCV – Contrato de Promessa de Compra e Venda” (preliminary contract). Thereon, both parties are committed. All the conditions that have been accepted by both parties are included in this promissory contract.
It is up to you to decide if you want to register this preliminary contract with the notary.
The purchaser makes a down payment of 10% to 30% to the seller. The remaining part of the purchase price will be paid during the transfer of ownership.
This down payment also acts as a penalty for the purchaser if he does not respect the conditions set out in the preliminary contract. If the seller fails to respect the contract, he must pay twice the amount of the deposit back to the purchaser as a penalty. This rule is not explicitly included in the preliminary contract, but it is indeed the law in Portugal.
If both parties agree to it, a suspensive clause for obtaining a mortgage can be added to the preliminary contract.
We recommend that you register the preliminary contract with the notary to prevent any possible seizures after the signature of the preliminary contract. If the preliminary contract is recorded with the notary, the property can no longer be seized.
There is a date set in the preliminary contract for the signature of the “Escritura Pública” (deed of sale). Generally, this takes place 3 to 12 weeks after the signature of the CPCV (preliminary contract).
Once signed, the deed of sale and the property are recorded in the “Conservatoria Do Registo Predial” (land registry), and the legal transfer is complete: you are the owner of your dream home!
Careful: your lawyer must register this transfer with the land registry.
To complete the transfer of ownership, the change of ownership must also be passed on to the electricity and gas supplier(s), the town hall and other institutions.
A Portuguese notary has a duty of integrity and rigour in terms of legal requirements, particularly in terms of authenticity.
The notary is subjected to an obligation of professional secrecy: information given to him in the exercise of his public functions should not in any way be revealed.
A notary also has a duty to advise: clients expect their notaries to be able to explain the different options available to them and the consequences of the acts that they will sign.
This duty implies neutrality and impartiality: the notary chosen by one of the parties has a duty of loyalty towards ALL parties to the transaction.
As a result, the Portuguese law does not allow him to represent one of the parties involved nor to participate in potential negotiations.
The notary is a public official, involved in all areas of law: family, real estate, wealth, business, rural.
Acting on behalf of the State, nominated by the minister of Justice, he imparts the acts that he writes with a stamp of professionalism and authenticity. He has true prerogatives of public power that he receives from the State.
He has the power to authenticate acts with his own signature. He officially records the will expressed by the persons who sign them and personally commits himself on their contents and the date of the act. Using a notary allows to undeniably prove the authenticity of acts as his acts have the same power as a final judgement.
The notary has a vital role in terms of proof and security. Nevertheless, to reinforce the strength of real estate transactions, any transfer of ownership must also be published to the official register (Conservatoria do Registo Predial).
The notary must perform this publication.
TAGUS PROPERTY has been working with Portuguese notaries for years.
|VALUE OF PROPERTY||PERCENTAGE||REBATE|
|Up to 97.407€||1%||No rebate|
|Between 92.408€ and 126.403€||2%||with a rebate of 1848,14€.|
|From 126.404€ to 172.348€||5%||with a rebate of 5640,23€.|
|From 172.349€ to 287.213€||7%||with a rebate of 9087,19€.|
|From 287.214€ to 574.323€||8%||with a rebate of 11959,32€.|
|Above 574.323€||fixed rate of 6%||–|
|VALUE OF PROPERTY||PERCENTAGE||REBATE|
|Up to 97.407€||1%||no rebate.|
|Between 92.408€ and 126.403€||2%||with a rebate of 924,07€.|
|From 126.404€ to 172.348€||5%||with a rebate of 4716,16€.|
|From 172.349€ to 287.213€||7%||with a rebate of 8163,12€.|
|From 287.214€ to 574.323€||8%||with a rebate of 11035,25€.|
|Above 574.323€||fixed rate of 6%||–|
THE IMT AND STAMP DUTIES ARE ONLY PAID ONCE AT THE TIME OF PURCHASE.
This is a fixed tax of 0.8% calculated on the value of the purchase, or the tax registration value, when the latter is higher.
IMI (Property Municipal Tax): between 0.3 and 0.8% of the tax registration value of the property.
You will pay IMI annually.
This property tax is calculated on the tax registration value of the property.
The rates are:
(IMI was 0.3% in 2019 in Lisbon for example)
This tax is paid as follows:
Some councils also charge a fee for the maintenance of sewerage networks. The amount is set by each municipality.
(The above-mentioned rates are those in force in 2019)
There is no inheritance tax in Portugal between spouses and direct ascendants and descendants. However, planning your inheritance requires the consultation of a professional to check the applicable inheritance law and, if necessary, set your marital regime.
Note that if your heirs reside abroad, they may still be taxed on the value of the estate in their own country.
Transfers between individuals are subject to stamp duty at the rate of 10%, except for those made to spouses, descendants or ascendants, which are exempt from this tax.
Taxes in Portugal (AL) – tax treaty EU – PT – SIMPLIFIED REGIME FOR NON-RESIDENTS
Taxation on the rent of furnished property(ies) to tourists when the activity is ran by non-resident individuals:
Activity subject to VAT (6%) if the turnover is above €10,000
Possible adoption of a simplified regime for calculating the income tax, up to a maximum turnover of €200,000 / year
Income from properties is taxable in the Country in which the property is located.
Taxes for short-term rent = €875
Figures for guidance updated in 2019
“We are a dedicated team of experienced Property Finders in Portugal to guide you through every stage.”