Purchasers needing finance for their property purchase have the choice of remortgaging their UK home or arranging a mortgage on their Portuguese property through a Portuguese or UK lender. Remortgaging offers the easiest route. Releasing equity in a UK home means that the second home can be purchased for cash, without the need for another mortgage. However, this option may only be feasible for those who own their first home outright.
Mortgages can be obtained through Portuguese lenders for purchase, re-financing and home improvements. A number of UK mortgage providers will lend funds of up to 80 per cent of the purchase price for second home purchase over, typically, a 15-year term. Portuguese providers will lend the same amount over a five- to 25-year term.
Euro mortgages, which are tied to the rate set by the European Central Bank (ECB), currently lower than the Bank of England base rate, may seem an attractive option, and several UK lenders offer them. However, because of the volatility of the currency markets, a euro mortgage may not be the best option for many people, who cannot afford to lose heavily should the currency move against them. Recent fluctuations have put the value of the Euro against Sterling much higher, to the cost of UK buyers.
The fact that the ECB’s base rate is at present lower than the Bank of England’s does not guarantee savings on repayments for those taking out a euro mortgage. As the UK mortgage market is competitive, there are many good deals available on sterling loans, so it is wise to shop around. The services of an experienced IFA should enable you to get the best deal for your circumstances.