Buying a House as a Freelancer in Portugal

If you're a freelancer (self-employed) and want to buy a house in Portugal, you might wonder how to get a mortgage with your variable income. While banks may see variable income as a risk, proper preparation can improve your chances of approval.

Why Is It Harder for Freelancers in Portugal to Get a Mortgage?

Banks prefer borrowers with stable incomes because it assures them that the loan will be repaid regularly. Freelancers often have incomes that change monthly, making banks more cautious. However, by showing consistent earnings over time, freelancers can still secure a mortgage.

Key Factors Banks Consider

When you apply for a mortgage, banks will look at several things:

Income History: At least two years of steady income helps show reliability.
Debt-to-Income Ratio (DTI): This is the percentage of your income that goes toward debt payments. Banks in Portugal usually prefer this to be below 35%.
Down Payment: For non-residents, banks may finance up to 80% of the property's value, meaning you'll need to pay at least 20% upfront

How to Prepare for a Mortgage as a Freelancer

To improve your chances:

Organize Your Documents:
- Tax Returns: Last two years' IRS declarations.
- Bank Statements: Recent statements showing income and expenses.
- Proof of Freelance Work: Registration as a freelancer and recent invoices.
Calculate Your DTI:
- Ensure your monthly debt payments (including the new mortgage) are less than 35% of your net income.
Save for a Down Payment:
- Aim for at least 20% of the property's price.
Compare Mortgage Offers:
- Different banks have varying terms.

Bank	Maximum Financing	Notes
Novobanco	Up to 80%	Free life insurance included
CGD	Up to 80%	Better rates with additional CGD products
Bankinter	Up to 70%	Lower spread for loans over €100,000

Is 100% Financing Possible?

While rare, some banks might offer full financing, especially for properties they own. However, these deals are uncommon, and having a down payment increases your chances of approval.

How Long Does Mortgage Approval Take?

The process usually takes between 2 to 3 months and involves:

Pre-Approval: Initial assessment of your financial situation.
Property Valuation: The Bank evaluates the property's worth.
Full Application: Submission of all documents.
Risk Assessment: The Bank reviews all information.
Final Approval and Signing: Completion of the process.

Are There Specific Laws for Freelancer Mortgages?

Yes, the Bank of Portugal has guidelines to ensure responsible lending. For example, they recommend that borrowers' DTI should not exceed 35%.

Buying a house as a freelancer in Portugal requires careful planning. By organizing your finances, understanding what banks look for, and comparing different mortgage options, you can increase your chances of securing a loan. Consider seeking advice from mortgage brokers or financial advisors to navigate the process effectively.