How much equity do you really need to buy real estate in Portugal? (As of 2025)

Interest in Portugal as a location for buying real estate, especially in the Algarve, has been growing steadily for years. But before a purchase contract is signed, the question often arises:
How much equity is required to purchase a property in Portugal?

In this article, you will receive a fact-based overview with current figures, a look at interest rate developments in recent years, information on the most important banks and practical tips for realistic financial planning.

Capital requirements: residents and non-residents

Portuguese banks distinguish between buyers residing in Portugal (residents) or those who purchase the property as a primary residence and those who live abroad (non-residents) and wish to purchase the property as a second home. This distinction has a direct impact on the amount of equity required.

• While residents / primary residences usually get by with 10 - 15% equity ,
• the requirement is often around 30% for non-residents / second homes, and 20% is sufficient for some banks. Banks usually limit the loan-to-value (LTV) ratio to 70 - 80%.

An example illustrates this: If you want to buy an apartment in Lagos for €500,000, you have to bring in at least €50,000 - €75,000 of equity as a resident. Non-residents, on the other hand, need 100,000 - 150,000 €. In addition, there are certain costs for the process at the bank itself and the ancillary purchase costs.

In addition, it should be emphasized that the banks carry out a real estate valuation as part of the credit check. The maximum loan amount (LTV) is determined on the basis of the lower value from the bank's valuation and the actual purchase price.

Ancillary costs when buying real estate

In addition to equity, buyers in Portugal have to reckon with ancillary costs, which add up to about 7 - 10% of the purchase price. These include the real estate transfer tax (IMT), which can progressively reach up to 7.5% depending on the purchase price, and the type of property also plays a role here, the stamp duty of 0.8% as well as notary, land registry and lawyer fees.

With a purchase price of €500,000, approx. €40,000 - €45,000 in ancillary costs are added, depending on the type of property and the specific amount of the lawyer's fees. These expenses should definitely be included in the calculation, as they cannot be financed through the loan. To get a detailed overview of the ancillary purchase costs when buying real estate, you can also read our blog post: "Incidental costs: Taxes and fees when buying property in Portugal in 2025."

Evolution of mortgage interest rates in Portugal

Until 2021, mortgages in Portugal were comparatively cheap. Variable interest rates were around 1 - 2% at the time, which strongly boosted real estate purchases. However, with the European Central Bank's interest rate turnaround from 2022 onwards, conditions rose significantly: in 2023 and 2024, variable-rate mortgages were mostly in the range of 3 - 4%, fixed interest rates at 3.5 - 4.5 %.

In 2025, the level will be at a comparable, slightly lower level. Banks and local customers traditionally prefer variable models that are linked to EURIBOR. The interest rate is then made up of the EURIBOR 6 or 12 and a "spread" that the bank adds itself. This spread can be around 1.9%. However, if you order additional insurance, such as building and life insurance as well as a credit card, which are necessary anyway, through the bank, then the spread can also drop to 0.8% or 1% if you have sufficient creditworthiness.

Recently, however, interest in fixed-rate loans has also increased, as is also common in some other countries. Buyers thus have planning security. However, depending on the term, these loans tend to have a higher interest rate. As a third option, there are models in which, for example, 4 years are fixed and then the variable interest rate follows.

Forecasts suggest that interest rates could continue to fall slightly until 2026, but not to the extremely low levels of the years before the sharp rise.

An important point: Banks make sure that the monthly loan installment does not exceed 35 - 40% of the buyer's net income . This so-called debt-to-income ratio often determines the amount of the possible loan.

Which banks finance property purchases in Portugal?

Several large banks offer mortgage products that are also interesting for international buyers. An overview:

• Millennium BCP is one of the largest private banks in Portugal, known for its wide range of products. It offers financing for both residents and non-residents and has English-speaking advisors.
• Novo Banco was created from the former Banco Espírito Santo. This bank caters to international customers and offers flexible mortgage solutions.
• Caixa Geral de Depósitos (CGD) is the state-owned bank of Portugal and is considered to be particularly solid. It is often the first port of call for conservative buyers who value stability.
• Banco Santander Totta is the subsidiary of the Spanish Santander Group. Thanks to its international network, it is often attractive to buyers from Spain, Germany or the UK.
• Banco BPI is also a traditional Portuguese bank that offers mortgage products for both personal use and investment properties.
• Bankinter is a smaller but dynamic bank with a strong focus on foreign buyers. It is known for fast service and English-speaking support.

The offers differ significantly, both in interest rates and in the requirements for income and documentation. A comparison is therefore worthwhile in any case.

Financing options and strategies

Most buyers resort to financing directly with a Portuguese bank. Alternatively, a loan in your home country can also make sense if better interest rates are available there and this is possible at all for foreign real estate. At the vast majority of banks abroad, a property is required in the country as collateral / for the loan.

Mixed financing, in which part goes through a Portuguese bank and part through the home country, is also possible. Those who have enough equity usually opt for a cash purchase. This increases the bargaining power for the purchase price and significantly shortens the purchase process.

There are also strategies that can be used to reduce the required equity. These include, for example, the acquisition of resident status via visa programs such as the D7 or the Digital Nomad Visa in conjunction with with the purchase of the property as a primary residence, as banks often grant residents better conditions. Proof of income in Portugal can also help, as banks often value it more favourably. A higher repayment rate or a comparison of several banks can also lead to a better financing framework.

Conclusion: Calculate realistically and plan for the long term

For buyers residing in Portugal who want to purchase the property as a primary residence, an equity share of 10 - 15% of the purchase price plus ancillary costs is usually sufficient. For non-residents / second homes, the requirement is 20 - 30%.

The interest rate trend shows that the times of extremely cheap financing are over, but that the level has recently settled somewhat. However, with stable, moderate interest rates and clearly calculable ancillary costs, it is still possible to finance real estate in the Algarve solidly and sustainably.

It is advisable to deal with this topic right at the beginning of the search for a property in order to make the actual property search and the purchase process as targeted and sensible as possible. So if you plan early, compare offers and realistically assess the equity requirements, you can successfully realize your dream of owning your own home in Portugal even without complete self-financing.

Are you planning to buy a property in the Algarve? Contact us for individual advice, we will support you throughout the entire purchase process.