Since 2018, banks have changed the maximum financing limits for properties bought through housing credit. Before that date, banks could lend 100% of the value of the houses, but currently it is no longer possible.

The Bank of Portugal has imposed new limits on loan-to-value (LTV), limiting the percentage of value that banks can lend. For primary residence, banks can lend up to 90% of the property value, and for secondary residence, up to 80% of the value. This means that if the property you intend to buy costs 200 thousand euros, for a primary residence, you must give at least 10% of the value (20 thousand euros), and for a secondary residence, 20% of the value (40 thousand euros).

Note, however, that the LTV is applied to the lower value of the property between the acquisition and evaluation. That is, if the property has an acquisition value of 200 thousand euros, but is evaluated at 180 thousand euros, for example, in the case of the first home you have to pay 10% of that value (18 thousand euros).

Note that the 10% is the minimum ceiling that banks can charge, but they can ask for more. It depends on your financial profile as a client. They can offer better conditions the less risk of default there is.

Is there a way to get 100% financing?

Currently, there is an exception in the law that allows obtaining financing or an LTV of 100%. If a property is under the possession of a financial institution, such as the bank, having been the object of attachment, it is possible to buy the house through fully financed credit. To do this, it is necessary to hire the housing credit from the entity that owns the property.

This happens because, as a rule, the bank wants to dispose of the properties it holds, as they have been foreclosed by other clients. These debtors have defaulted, so the bank initiates an executive action in order to sell the property and settle the debt.

Can I hire a personal credit for the down payment?

No, by law it is not possible to hire a personal loan for the initial entry of a housing loan.

Since the law imposed limits on LTV aimed to protect banks from the risk of customer default, when obtaining two credits, the risk remains.

In other words, having two contracted credits increases a client's debt-to-income ratio, and the risk that banks are exposed to is the same as if they were to grant financing for the property at 100%.

Therefore, granting a personal loan as a complement to a mortgage loan is currently illegal and contrary to what is intended by law.

How to get maximum financing from the bank?

To obtain the bank's maximum financing, you need to meet certain requirements so that the institution considers your loan low risk.

The higher the level of risk and default, the less financing the bank provides. Therefore, if you have a strong financial profile, you can obtain the maximum LTV limit that the bank can achieve depending on the property's purpose.

In other words, it is advisable that your effort rate (weight of credit obligations in net monthly income) is within the ideal percentage. The maximum limit that banks allow for the effort rate, according to the indications of the Bank of Portugal, is 35%.

In addition, it also weighs as a requirement the fact that the proponent must have a professional contract for an indefinite period, as it indicates greater stability and predictability of the income to be received.

After, the more credit holders there are, better conditions can be achieved. This is because more than one person indicates more income, which reduces the level of default risk of monthly installments. The same happens if there are guarantors, providing an additional guarantee.

It is important to be informed about the entire housing credit process beforehand, before proceeding with the hiring, to make the best decision for you. The more you know, the better you decide and the more you can save. For this, you can choose the help of a credit intermediary, such as those from Poupança no Minuto, who deal with all the bureaucracy with banks and clarify all your doubts, through a free and personalized service.

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