Mortgage Fees and Expenses
The costs and fees associated with setting up a Portuguese mortgage and associated ongoing costs are not insignificant, and they vary from bank to bank. Also, very often lenders combine the mortgage fees and expenses with other in-house services and products thus making comparisons between lenders very difficult. So it is not just the designation of the fees that vary slightly depending on the institution. Some banks do have higher costs and charge more often than others so it is well worth negotiating with your lender over the administrative costs. Banks in Portugal charge fees at the time of setting up a mortgage, ongoing fees relating to mortgage administration and fees at the end of the mortgage term and these are discussed in more detail below.
Please also note that by taking out a mortgage in Portugal you may incur additional expenses to register the charge, including Notary fees, Land Registry fees and Government Legal Fees and Taxes.
Mortgage fees and expenses at the beginning of the process
A mortgage analysis fee (Comissão de Estudo do Crédito de Habitação) is carried out before a mortgage offer is made. It is common practice in Portugal to charge a fee for the review of the loan application, even if the funding is not approved or a mortgage offer is not accepted. These fees are generally available from the bank and should be checked before any application is submitted. The lender´s valuation fee (Comissão de Avaliação) pays for an independent surveyor to value the property and you may be required to add travel costs to specific locations in Portugal and you will be charged this fee regardless of mortgage approval. You may request to see your valuation report as it can become a valuable negotiation tool with the seller.
The bank will charge another fee when granting the mortgage (Comissão de formalização do crédito de habitação)
Partial or total early redemption fee (Custo de Reembolso Anticipado Parcial ou Total). At any time, you may request to redeem the whole or part of the loan. However, banks will charge a fee for early repayment. The value of the early redemption fee cannot be higher than 0.5% of the repayment amount for mortgages with a variable interest rate or 2% for mortgages with a fixed interest rate. In either case, you would also need to pay 4% stamp duty in addition to the early redemption fee.
Example: If you wanted to make an early repayment of € 6,000, the bank can not require you to pay more than € 30 (0.5%) or € 120 (2%), depending on whether the rate is variable or fixed, plus 4% stamp duty.
You will have to pay a monthly processing fee (Comissão de Processamento) with each monthly payment.
Banks will charge a fee for the recovery of late payments (Comissão de Recuperação de Valores em Dívida) but by law, it cannot exceed 4% of the amount of the overdue instalment with a minimum of 12 euros and a maximum of 150 euros. The bank can add interest (Juros Moratórios) for late payment.
Mortgage fees and expenses at the end of the term
At the end of the mortgage, some banks in Portugal charge for issuing the Distrate which is an official document that allows you to cancel the loan and prove that there is no mortgage on the property.