by Peter Statham [email protected]
Peter Statham has worked in the Financial Services industry for 12 years. Along with personal financial advice, he specialises in commercial and residential real estate finance.
A property represents one of the largest investments most will ever make and it is important, as with any investment, to consider professional advice before, during and after you sign the deed.
It should be mentioned that property should be considered a long term investment and, in most cases, it is not a way of making a quick profit.
This article will concentrate on two of key parts of the process and how Blacktower Financial Management can help and touch upon some of the other areas where clients should seek professional advice.
Financing a property in Portugal
In this market, it has become more common to use cash or an equity release from a main residence in a client’s home country; this is because the mortgage market in Portugal has in no doubt become a tough place in recent years.
This is shown by the number of banks lending to non-residents dropping from over 20 to just a hand full. However, for many reasons a mortgage secured on a holiday home, as opposed to your main residence, should be considered as a better option for most; reasons include for additional risk placed on your home or potential the cross currency exposure risks.
There is some good news though, as whilst it is tougher, it is still possible to get a mortgage in Portugal for non-residents buying a holiday home or for clients looking to move to Portugal.
Mortgages in Portugal, in recent years, have seen contraction of the level of risk banks are prepared to take. This has seen an increase in the level of equity that the client must invest into the purchase of property.
Banks will still lend to levels of 70%-80% of valuation but will now consider the purchase price, and will often take the lower of the two when taking into account the level of investment needed by the client.
Another change is the cost at which Portuguese banks are able to source funding from the world money markets, which has resulted in the increase in the margins charged over the base rate.
This has, of course, been counteracted by the lowering of the base rate, and thus in some cases it is still possible to achieve lower inclusive rates than a few years ago. Margins start for a mortgage of up to 70% at 2.5% and upwards, depending on client status and the bank’s appetite to lend.
A mortgage product in Portugal can be structured to the client’s needs and there are many aspects that can be built into a mortgage product such as interest-only periods and fixed rates.
At Blacktower we have qualified advisers with whole of market representation; we can advise on mortgages in Portugal and other countries including the UK, Spain, and France.
A small note for those using their own capital and transferring funds across currencies, it is worth considering the method by which you do this; transferring straight to your lawyer’s client account from your home currency account will not always be the most cost efficient way and it will be worth seeking advice from a currency specialist who can often save the client a considerable amount in the exchange.
Blacktower are not currency specialists, but hold relationships with regulated firms that can be introduced to clients.
Overseas home insurance
Once you’ve committed to buy your overseas home, you need to, of course, consider protecting your investment, and this is something that should be looked at before the signing of the deed.
There are many areas that need to be considered, and it is worth running through all aspects with a qualified and regulated adviser.
Some of the main areas to consider are:
• Buildings cover for the full rebuild value of the property, covering a full range of perils.
• Contents cover for full value of all contents within the property. This can include accidental damage cover as well.
• If you plan to rent the property, you should consider: are you covering your liability as the owner of the property whilst your guests are staying there?
• If you have taken a Portuguese mortgage, it will often be the case that the mortgaging bank has asked for a buildings policy already and, in many cases, will give small discounts on mortgage rates if you take out the bank policy.
At Blacktower Financial Management, we have qualified advisers to run through all your insurance concerns for your property and who are able to advise on a whole range of other general insurance products.
All mortgages are subject to status and your property is at risk if you do not keep up repayments on a mortgage or other loans secured on it.
This facility is not suitable for all expatriates, and we recommend that advice is sought before one makes any commitment. As an Independent Financial Adviser, Blacktower seeks to ensure that our clients receive the advice suitable for their specific circumstances. Please contact us for further details on 289 355 685.
A little about the author: Peter Statham has worked in the Financial Services industry for 12 years and holds an array of internationally recognised qualifications including an Honours Degree in Financial Services; he is also a qualified member of The Chartered Institute of Insurance, The Personal Finance Society and Society of Mortgage Professionals in the UK. He is the second generation of a family that been a part of the property finance industry in Portugal for almost 30 years and, as such, his connections within financial institutions in Portugal reach the highest levels, thus along with personal financial advice, he specialises in commercial and residential real estate finance.