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Home Loan Simulator

Make a home loan simulation. Set up the indicators according to your own particular case.

* The loan amount cannot exceed 85% of the property´s contract value.

After choosing the perfect property it is now time to gather information and take one of the most important decisions in your life: choosing your Home Loan.

What are the Home Loan stages?

This is a crucial element for banks to grant credits and represents, in a family, the weight of an instalment in the average monthly income.

The effort rate is analyzed in detail by the financial institution through mathematical formulas. It is calculated based on the household income and also on all fixed costs and existing instalments.

When considering all charges, if the effort rate result is between 40% and 60%, it is a positive indicator for credit decision.

What to consider when calculating the effort rate?

  • Monthly credit instalments (car credit, personal, etc.) – Fixed household costs (such as water, electricity, etc.);
  • Calculate the instalment of the new loan;
  • Identify other charges that you consider relevant;
  • Identify the monthly net income amount;

You must now add up all the expenses identified according to the above-mentioned items. Divide this result by the monthly net income and you will have calculated the effort rate of housing credit.

What documentation do I need to prepare?

In order to carry out a simulation it is necessary to collect the following documentation from the tenderer(s):

  • Identity Card + NIF or Citizen Card;
  • IRS Statement;
  • IRS Settlement Note;
  • Last 3 payment receipts;
  • Statement by the employer indicating the contractual relationship;
  • Bank statements from the last 3 months;
  • Authorization to consult Banco de Portugal (CRC declaration) signed;

In case there are guarantors, the documentation required is the same.

Glossary Mortgage

TAN – Annual Nominal Rate. It consists of an annual rate, as the name implies, used in transactions involving the payment of interests (loans or income from deposits)

TAE – Annual Effective Rate. This rate takes into account the costs inherent in a loan application, such as interests, processing costs and commissions, thus representing the annual cost of a loan according to the amount owed or the remuneration of a deposit. It is a great indicator to compare the effective cost of a home loan. However, it does not reflect the insurance charges and other products associated with the purchase of a home loan. This is the rate you can use to compare the cost of a home loan among several institutions.

APR - Annual Percentage Rate. This fee includes the cost of the credit insurance in addition to the interest and expenses on charges and commissions. To compare the actual cost of a personal, auto or consumption loan between financial institutions, this rate is a good indicator.

RAPR – Revised Annual Percentage Rate. Consists of an APR plus the subscription costs of other related products. Home loan simulations must include this rate, in case a product which reduces the spread costs is subscribed. To make the comparison between several institutions, one should use this rate whenever there are products that reduce the «Spread».

LTV - Loan-to-value or financing/warranty ratio. This is a ratio that relates the funding amount with the value of the property (warranty). LTV defines how risky it is for the bank to finance the amount requested by the client. The higher the risk, the more likely it is for the spread to be higher too.

Spread - Profit rate charged by financial institutions to approve a credit. Spread doesn´t have a fixed value. Therefore, it is adapted to each case according to the client´s profile (risky or not). In the end, the interest rate of the loan is the result of the sum of the spread with the index (usually, credits are indexed to Euribor tax - 6 months).
House loans are becoming increasingly more restricted because of the difficulty financial institutions have to achieve the necessary liquidity. So, they use the Spread as an instrument to avoid credit requests by customers with higher risk profiles.

Euribor – Most widely used Index, available in 3, 6 or 12 months. It´s a rate based on the average rate of interest charged by financial institutions located in the Euro Zone to finance each other. It works as an interest rate between banks. Euribor rates are fixed once a day (roughly around 10:00 Lisbon time) for all time periods. In Portugal it is the most recurring index to get a home loan and, for that reason, when this rate drops the loans cost decreases and vice versa. The evolution of the Euribor rates conditions the interest charged even in those cases where contracts are indexed to a fixed rate.

Fixed rate – A fixed fee is stipulated together with the financial institution when applying for the credit. This will never change during the loan period.

Variable rate - Variable rate varies according to an index, so the monthly fee may change according to the index changes that happen during the loan. In short, if the index value increases, the rate applied will be higher and vice versa.

Residual value - The residual value consists of leaving 10% to 30% of the loan capital to the end of the loan period. This helps to provide lower instalments during the term of the loan. A lower instalment means paying more interest and on each instalment and amortizing less capital, according to the variation of the interest rate. When choosing the residual value, keep in mind that you may have to make a higher effort to pay the monthly fees at the end of the loan.

Lack of capital – This is a loan period where no financed capital is paid, only the interest is paid. The Lack of capital period may vary between 1 to 5 years and is included in the total period of the loan. Portuguese people commonly use this option to reduce the monthly instalment during the first years of the loan. Please note that during this period, it does not constitute heritage.