By Ricardo Chaves [email protected]
Ricardo Chaves is Operations Director of Money Mais, the financial services company based in Almancil. Money Mais is an independent mortgage advisor and provides foreign exchange services in association with Moneycorp, who are one of the UK’s leading foreign exchange and international money transfer providers.
Equity release is an ideal way of raising funds if you own a property in Portugal which is mortgage free. You can release up to 65 per cent of the bank valuation on your property (including any existing loans), and the loan term is for 30 years or up to 75 years of age.
The mortgage is a capital repayment loan; although in certain circumstances it is possible to arrange the payments with a residual amount which is paid off at the end of the loan term. In this case, you make capital and interest payments on eight per cent of the loan, leaving a one-off payment of 15 per cent to be made as the final loan payment.
There are several lenders who offer equity release mortgages; all have different terms and conditions – some lenders will let you repatriate funds, others prefer that the funds remain in Portugal. It’s important that you discuss your plans for the release of funds with a Financial Consultant so that he can approach the right lender for your situation.
In most cases, clients who apply for Equity Release Mortgages are nearing retirement age. However, this is not seen negatively by lenders as they will lend up to a maximum of 75 years of age.
As long as you have the means to repay the loan, and there is sufficient equity in your Portuguese property based on an independent valuation, you will qualify for an Equity Release Mortgage.
Most lenders require life insurance cover for Portuguese residents; although banks lending to non-residents don’t insist upon life insurance.
If you’re considering releasing funds from your property, it’s likely that you have a timeframe that you need to work to, so it’s useful to know what you need to do and how long the process will take so that you can plan ahead.
It can take up to eight weeks for funds to be released from when the mortgage application is submitted. You just have to fill in an Application Form, and provide supporting documentation, as well as documentation for your property.
Once all the documents have been collected and checked, the mortgage application is prepared and sent to the lending bank (or banks) who will perform a credit analysis and check whether you can afford to repay the loan.
When the credit check is complete, the lending bank will send a mortgage approval which is subject to valuation.
Then the lender will arrange for a valuation to be carried out by an independent valuer who is contracted by the bank.
During this time, the lending bank will open a bank account in your name (the account opening forms are included in the mortgage application).
Having received the valuer’s report, the bank will advise what they are prepared to lend you, and will confirm the Mortgage Offer.
The lending bank arranges an appointment at the local Notary’s office where a mortgage contract is signed between you and the bank, and on that day the funds are released into your bank account.
The cost of arranging a mortgage varies from lender to lender, so it is advisable to allow for bank costs of 1,000 Euros, which will cover the application, valuation and contract fees. In addition, you will be expected to pay notary fees (556 Euros), registration fee (500 Euros), stamp duty on the loan amount (0.6 per cent of the loan) and legal fees if you can’t be present at the deed and have arranged a power of attorney to enable your lawyer to represent you.
It’s possible to release funds from your property before the end of the year, but you need to act now.
Remember Money Mais is totally independent and we pride ourselves in finding the best deal for our clients.