Euro mortgages

1915

Euro mortgages – An investment tool for buying property in Portugal?

 

In this article we take a closer look at the growing trend of north European clients using Portuguese mortgages as a smarter way to purchase their home in the sun! Below are some of the main reasons why this trend has statistically increased year on year since 2003 :-

Cost of borrowing

Euro interest rates in Portugal continue to remain at low levels. A variable rate mortgage for non-residents can be acquired at a rate of 3.25% (may be lower for residents or if linked to certain banking products).

Rental Yields

Average rental yields across the Algarve are in the region of around 5%, we can therefore see straight away that the rental yield already comfortably covers the cost of the mortgage during the interest only period. Furthermore, clients are able to retain the cash they were going to use for the purchase in conservative funds that are currently yielding anywhere up to 4%

Foreign exchange exposure

If you are a UK client you will be aware that Sterling is still trading at low levels against the Euro and you may be waiting until that exchange rate moves to a higher level. With a Portuguese mortgage you can immediately mitigate up to 80% of the foreign exchange exposure as you will be borrowing in the same currency denomination as the asset you are buying.

Redemption charges

Early and partial redemption charges for a habitation, variable rate acquisition mortgage are now capped by legislation by the Bank of Portugal at 0.5% of the amount redeemed. This gives you greater transparency and piece of mind from the outset in knowing what your charges will be if you sell your property early or wish to repay some of your loan.

Credit rating

Mortgages taken out in Portugal should not affect your home credit rating score

Added security

When a bank in Portugal gives you a mortgage, they will carry out their own due diligence on the property you are buying and thereby ensuring that you benefit from the banks' legal department making sure that your property documents are in legal working order.

Improved banking services

In the last 5 years there have been big improvements from the banks in Portugal as far as customer service is concerned for non-resident clients. Most banks now provide internet access in English as well as a dedicated client relationship manager for after sales care service.

 

Quinta Finance, May 2011

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