Date of Issue: 28th Feburary 2012
Infinito Real sees high demand but warns potential buyers on the reality of finance
November and December saw a surge of interest in Algarve property with Infinito Real, a Portugal based agent, reporting year on year booked viewing figures tripling in demand. Whilst this marked increase of interest in Portuguese real estate is welcomed, Stephen Anderson, Managing Director, has found many ‘would-be’ buyers have little knowledge of current property prices or associated finance requirements and is advising potential investors to seek expert advice before making a trip.
Economic uncertainty has inadvertently led many investors to believe that banks in countries such as Portugal will welcome lending opportunities and that securing a mortgage as a non-resident is much the same as it is in the UK. However, non-residents applications for mortgages in Portugal are not looked upon in the same way as residents. Stephen says “More often than not, we have to manage clients’ expectations which can be quite unrealistic. We have found that many clients coming over on viewings have very little finance to put down and arrive under the premise they will be able to secure a high loan-to-value mortgage, which are in fact typically constrained to borrowers that have, and can prove, a high income. Others, arrive with some €100,000 but have way over-estimated what they will be able to purchase, expecting to find sea-front apartment for that amount.”
According to Infinito Real, compared to three years ago, property prices have reduced by approximately 40-50%, but banks have become much more stringent with their criteria. Mortgages are still available up to 80% of the purchase price, “However, the interest rate on such a high loan to value mortgage would be approximately 6.5% so this is not an easy option and in my opinion, is generally not worth considering” says Stephen.
He continues “Clients should certainly be looking to put down at least 30% to have some options here, and be able to demonstrate an income of at least £5,000 per month to be able to qualify for a 70% loan. There are a lot of factors the banks take into account now, so there is no straight forward calculation that says, if you make X then you qualify for Y.
Rates are still available at around 4% for qualifying buyers, and these are competitive rates for non-resident mortgages. Stephen advises buyers to bear in mind the majority of the rate is fixed for the entire term of the loan, making it a secure and easily predictable mortgage option.
Anderson continues: “In the cases of many of the clients who have visited us over the last couple of months looking to purchase properties either as holiday homes or buy to let investments, there are options which will enable them to make a purchase. However, some would have been in a more proceedable position if they had spoken to an expert on their finances beforehand. Regardless of how high a customer’s income, small changes such as ensuring your bank account is in the plus and has not been over drawn for the last three months can help banks look more favourable on a mortgage application. This is especially pertinent for those who are self-employed but specialist assistance can advise on the best way to appeal to the banks and avoid applications being rejected.”