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As of April 1, the Bank of Portugal has limited the maximum amount of mortgage payments by age to 40 years. In this article, based on the Portuguese real estate news site Idealista we will explain to you the changes that are expected in the mortgage terms and how they will affect the buyers of real estate in Portugal.
Why is it important for us to know for how many years you can take out a mortgage in Portugal? Whether you are investing or planning to invest and buy real estate in Portugal in the near future, it is very important that you are familiar with the new mortgage terms. The longer the repayment duration, the lower the monthly repayment. The purpose of the new terms is for easier repayment and certainly, for investors looking to maximize their profits, the monthly repayment to the bank is a very significant figure.
Read in this article:
For how many years can you take out a mortgage and at what ages?
Benefits for those who want to take out a mortgage
Can the new conditions slow down the granting and approval of mortgages?
What are the goals of the age-restricted new mortgage terms?
For how many years can you take out a mortgage and at what ages?
Until April 1, it was possible to take a mortgage from a minimum term of 7 years to a maximum of 35 years and finish paying it up to the age of 75. From April 1, the new recommendations of the Portuguese Bank came into force that limit the maximum amount of mortgage payments by age and increase the number of years in which the payments can be spread from 35 to 40 years.
In total, the maximum number of years of mortgage payments is 40, according to the following ages:
Ages 30 and under: You can pay a mortgage for 40 years.
Ages 30 to 35: A mortgage can be paid for 37 years (i.e., a 3-year reduction)
* Ages 35 and up: The maximum mortgage amount is given for a period of 35 years.
* This condition will not apply to ages 40 and up because most Portuguese banks only allow you to take out a mortgage until the age of 75.
Benefits for those who want to take out a mortgage
Idealista experts explain that a reduction in the years of mortgage payments means a lower total amount because of the interest paid in fewer years and therefore is also lower.
In addition, the new conditions will make it possible to save for the ancillary expenses involved in purchasing a property, for example home and property insurance, and reduce the commissions for these expenses.
Can the new conditions slow down the granting and approval of mortgages?
Banks show great willingness to finance apartment purchases: According to data from the Bank of Portugal, in February 2022, the total amount of mortgages granted was 97,462.6 million euros, the highest recorded since 2016.
“Conditions of this kind have a marginal effect on reducing mortgages,” said Filippa Garcia, an economist at the International Monetary Fund quoted by Dinheiro Vivo. In his opinion, a future decline in mortgage lending may be related to expectations of an increase in interest rates and inflation, a decline in confidence in economic factors, an economic slowdown and a subsequent slowdown in real estate.
What are the goals of the age-restricted new mortgage terms?
The main goal of the published Portuguese Bank is clear: “By the end of 2022 to limit the new mortgages that will be granted to 30 years”.
The Portuguese regulator, led by Mario Santano, adds that institutions do not take excessive risks in granting mortgages, in order to successfully defend the financial sector against negative potential shocks and promote access to sustainable financing by consumers, while minimizing the risk of default.
Read here about banking services in Portugal.
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