How I Helped a UK Multiple Business Owner Overcome the Odds and Secure a Portuguese Mortgage
“Thanks to the mortgage I secured, Michael was able to purchase a stunning, fully refurbished apartment with breathtaking sea views, just a short walk from some of the world's most beautiful beaches, including the award-winning Praia da Falésia.
He now plans to spend at least 10 days a month in Portugal and is seriously considering a permanent move, having gained a deeper understanding of the Portuguese banking system and the importance of building relationships.”
Key Takeaways:
Owning multiple businesses can complicate Portuguese mortgage applications, but success is possible with expert guidance.
Misconceptions about Portuguese mortgage requirements often discourage UK business owners from pursuing their dream.
Local expertise, language proficiency, and strong relationships are crucial for navigating the Portuguese banking system.
Understanding the client's unique financial situation is key to developing a tailored strategy and overcoming obstacles.
Meticulous organisation and prompt communication streamline the application process and manage extensive documentation.
Securing a Portuguese mortgage opens doors to future financial opportunities and a fulfilling lifestyle.
A dedicated, knowledgeable advisor who prioritises the client's best interests makes all the difference in achieving success.
Summary:
“The UK-based broker informed him that it would be impossible for him to receive a mortgage in Portugal due to his circumstances…”
As a seasoned mortgage advisor, I recently had the privilege of working with Michael, a UK business owner who had fallen in love with the Algarve region of Portugal and dreamed of purchasing a holiday home there. After a challenging few years, particularly during the COVID-19 pandemic, Michael was seeking a peaceful retreat with better weather and a more relaxed lifestyle.
Michael's goal was to acquire an apartment or house with a sea view, situated in a tranquil location within easy reach of Faro airport and other amenities. Although he had the financial means to purchase the property outright, Michael wisely opted for a mortgage to avoid tying up a substantial amount of cash, preferring to invest it in other business opportunities.
As a UK small business owner, Michael faced a common challenge when seeking a mortgage. Like many entrepreneurs, he had left most of the profits in his companies for tax-saving purposes and to reinvest in other ventures. Despite the profitability of his businesses, Michael had been living modestly, taking only £50,000 in salary and dividends annually. This modest personal income posed difficulties when applying for mortgages, as banks often disregarded the true financial strength of his companies.
Recognising the complexities of his financial situation and the potential language barrier, Michael sought professional assistance from a UK broker to navigate the Portuguese mortgage process. The UK-based broker informed him that it would be impossible for him to receive a mortgage in Portugal due to his circumstances.
Michael needed an advisor who could understand his unique circumstances, communicate effectively with Portuguese banks, and patiently work towards finding a suitable mortgage solution. This is when Michael sought my services.
The Challenges:
“Discouraged by this misinformation, Michael nearly abandoned his dream of owning a home in Portugal…”
Obtaining a mortgage in Portugal can be a daunting task for foreigners, especially when relying on English-language resources that often provide incomplete or inaccurate information, especially when the purchaser has no in-depth knowledge of the Portuguese banking system.
The Misconceptions of Portuguese Mortgage Requirements
One of the most frequently mentioned concepts is the *taxa de esforço*, which stipulates that a borrower's mortgage and other expenses should not exceed 30% of their income. This concept is not commonly applied in the UK, where mortgage affordability is typically assessed as a multiple of income without considering all expenses someone’s expenses in detail.
The *taxa de esforço* is typically assessed by looking at the individual’s most recent tax return, which in Michael’s case showed income of £50,000, even though he could easily have withdrawn higher dividends if needed to pay for his new Portuguese mortgage.
Many English-language resources portray Portuguese banks as conservative and inflexible, incorrectly stating that the only way for foreigners to obtain a mortgage is by selling their UK home. Michael had been told by several self-proclaimed UK "experts" that due to his high UK mortgage expenses and his modest personal income of £50,000, it would be impossible for him to secure a mortgage in Portugal. Some even went as far as to suggest that offering him a mortgage would be a criminal offence under Central Bank of Portugal regulations.
Discouraged by this misinformation, Michael nearly abandoned his dream of owning a home in Portugal. He explored various alternatives, such as selling his UK home, taking out other forms of borrowing, selling his businesses, or seeking a Lombard loan. Fortunately, through a contact in Portugal, Michael was introduced to me – a genuine expert in the field.
The Importance of Local Expertise and Language Proficiency
Michael's limited proficiency in Portuguese and the need for an advisor fluent in both Portuguese and English made our collaboration a perfect fit. Additionally, the personalised nature of the Portuguese banking system, where building relationships with bank managers is crucial, posed another challenge for Michael as a foreign buyer.
Navigating the Personalised Portuguese Banking System
My local expertise and network of contacts allowed me to help Michael "shortcut" the process by connecting him with a bank manager who was willing to take the time to understand his unique situation and develop a long-term relationship.
My Strategic Approach:
“Drawing upon my extensive experience and network, I identified several potential banks that could cater to Michael's needs”
A Thorough Understanding of Client's Financial Circumstances
To ensure the best possible outcome for Michael, I devoted a significant amount of time to thoroughly understanding his specific financial circumstances. Despite the relatively modest commission from his mortgage, I was committed to providing him with the highest level of service and attention.
Streamlining the Application Process
I began by providing Michael with a comprehensive list of all the documents required for a Portuguese mortgage application. By gathering this information upfront, we were able to present a strong case to the bank and avoid unnecessary delays.
Identifying the Right Banking Partner
Drawing upon my extensive experience and network, I identified several potential banks that could cater to Michael's needs. However, I strongly recommended focusing our efforts on one particular bank that had previously demonstrated a practical and understanding approach when working with clients in similar situations. This targeted strategy saved valuable time and resources, as opposed to approaching multiple banks simultaneously.
Maintaining Prompt Communication
Throughout the process, I maintained prompt communication with Michael via WhatsApp, mail and phone, ensuring that he was kept informed and could provide any additional information requested by the bank in a timely manner. My responsiveness and attention to detail were essential in keeping the process moving forward smoothly.
Balancing Efficiency and Cultural Sensitivity
While the actual process of purchasing a property in Portugal is often quicker than in the UK in terms of obtaining legal and title documents, the mortgage process can be slower due to the lack of automated decision-making. To navigate this, I leveraged my local expertise and years of experience to strike the right balance between keeping things moving and respecting the Portuguese culture's emphasis on patience and non-confrontational communication. My native-level Portuguese language skills were invaluable in this regard.
Overcoming Obstacles:
“The volume of documentation far exceeded what is typically required for a UK mortgage, where banks often rely on a single-page accountant's certification of a company's profits.”
The Challenge of Owning Multiple Businesses
Michael's financial situation presented several unique challenges that required careful navigation. In addition to the obstacle posed by his modest personal income relative to his business profits, Michael's income was derived from three separate UK companies. This added complexity to the process, as the bank needed to understand the rationale behind the multiple companies and required three times the usual amount of documentation.
The Additional Complexity of Multiple Bank Branches
Another hurdle we encountered was the bank's internal decision-making process. Michael's case had to be referred to the Risk Department, which was located at a different branch from his assigned bank manager. This necessitated extensive discussion and the provision of additional documents to satisfy the Risk Department's requirements. The volume of documentation far exceeded what is typically required for a UK mortgage, where banks often rely on a single-page accountant's certification of a company's profits.
Managing Extensive Documentation Requirements
To overcome these obstacles, I worked closely with Michael to ensure that all the necessary documentation was collected, organised, and presented to the bank in a clear and comprehensive manner. My meticulous approach and attention to detail were crucial in keeping track of the various requirements and ensuring that nothing was overlooked.
Insights Gained
“Through our successful collaboration, Michael was able to secure a mortgage on excellent terms…”
Securing Favourable Mortgage Terms
Through our successful collaboration, Michael was able to secure a mortgage on excellent terms. As a testament to the strength of our case and the relationships I had cultivated, the bank manager went above and beyond to offer Michael the most favourable interest rate possible, resulting in significant monthly savings.
Building a Strong Foundation for Future Financial Dealings
The positive outcome of this case extends beyond the initial mortgage. As a result of our work together, Michael has established a strong foundation for future financial dealings in Portugal. He has had several productive meetings with the same bank manager regarding savings accounts, setting up a company in Portugal, and even the possibility of purchasing an additional property in the coming years. The bank's specific ex-pat bank account for individuals moving to Portugal has also provided Michael with valuable information and benefits to support his transition to life in the Algarve.
Establishing Valuable Banking Relationships
Without my assistance, it is doubtful that Michael would have been able to obtain a mortgage, given his complex financial situation and lack of prior financial or tax history in Portugal. My expertise, language skills, and network of relationships were instrumental in navigating the Portuguese mortgage process and achieving a successful outcome.
Putting Client's Best Interests First
It is worth noting that as a commission-based advisor, I could have been tempted to encourage Michael to take on a larger mortgage than necessary. However, I firmly believe in putting my clients' best interests first and never applied any such pressure. Michael expressed amazement at the amount of time and effort I dedicated to his case, even though he was not one of my largest clients. This level of personalised service and commitment is something that sets me apart from many UK-based advisors.
Conclusion
Thanks to the mortgage we secured, Michael was able to purchase a stunning, fully refurbished apartment with breathtaking sea views, just a short walk from some of the world's most beautiful beaches, including the award-winning Praia da Falésia. He now plans to spend at least 10 days a month in Portugal and is seriously considering a permanent move, having gained a deeper understanding of the Portuguese banking system and the importance of building relationships.
Michael's story serves as a powerful example of how, with the right guidance and expertise, UK business owners and individuals with complex financial situations can successfully navigate the Portuguese mortgage process and turn their dreams of owning a home in Portugal into a reality.
As a mortgage advisor specialising in helping UK residents and other foreigners obtain Portuguese mortgages, I take great pride in my unique combination of language skills, in-depth knowledge of the Portuguese banking system, and extensive network of relationships. These assets allow me to open doors for my clients, both figuratively and literally, guiding them through the process with patience, dedication, and a deep understanding of their individual needs and aspirations.
If you, like Michael, are dreaming of owning a piece of paradise in Portugal, I am here to help you make that dream a reality. With my expertise and personalised approach, you can confidently embark on your journey to Portuguese homeownership, knowing that you have a trusted partner by your side every step of the way.