Is it possible to get 100% financing for a mortgage?
Is it possible to buy a house being 100% financed by the bank? Currently, there are limits to the value banks can lend. However, there is an exception. We explain which in this article.
What is the maximum ceiling that banks finance?
Since 2018, banks have changed the maximum financing limits for properties purchased through mortgage credit. Before that date, banks could lend 100% of the value of houses, but currently it is no longer possible.
The Bank of Portugal has imposed new limits on loan-to-value (LTV), limiting the percentage of value that banks can lend. For primary residence, banks can lend up to 90% of the property value, and for secondary residence, up to 80% of the value. In other words, if the property you intend to purchase costs 200 thousand euros, for a primary residence, you must provide at least 10% of the value (20 thousand euros), and for a secondary residence, 20% of the value (40 thousand euros).
However, note that the LTV is applied on the lower value between the acquisition and appraisal value of the property. For example, if the property has an acquisition value of 200 thousand euros, but is appraised at 180 thousand euros, in the case of a primary residence you must provide 10% of that value (18 thousand euros).
And note that the 10% is the minimum threshold that banks can charge, and they can request more than this amount. It will depend on your financial profile as a customer. They can offer better conditions, the less risk of default there is.
Is there a way to obtain 100% financing?
Currently, there is an exception provided by law that allows for obtaining a financing or Loan-to-Value ratio of 100%. If a property is in the possession of a financial institution, such as the bank, having been the subject of seizure, it is possible to buy the house through fully financed credit. To do this, it is necessary to hire the home loan from the entity that owns the property.
This happens because, as a rule, the bank wants to dispose of the properties it holds, as they have been seized from other clients. These debtors have defaulted, so the bank initiates an executive action in order to sell the property and settle the debt. liquidate the debt.
Can I hire a personal credit for the down payment?
No, by law it is not possible to take out a personal loan for the initial payment of a mortgage loan.
Once the law imposed on the LTV limits aimed to protect banks from the risk of default by customers, by carrying out two loans, the risk remains.
In other words, having two contracted credits increases a client's effort rate and the risk to which banks are exposed is the same as if they granted 100% financing of the property.
Therefore, granting a personal loan as a complement to a mortgage credit is currently illegal and not in accordance with the intended by law.
How to get maximum financing from the bank?
To obtain the maximum financing from the bank, you need to meet certain requirements so that the institution considers your loan low risk.
The higher the level of risk and default, the less financing the bank provides. Therefore, if you have a solid financial profile, you can obtain the maximum LTV limit that the bank can reach depending on the property's purpose.
In other words, it is advisable that your "effort rate" (weight of credit obligations in monthly net income) is within the ideal percentage. The maximum limit that banks allow for the effort rate, according to the indications of the Bank of Portugal, is 35%.
In addition, it also weighs as a requirement the fact that the proponent must have a permanent professional contract, as it indicates greater stability and predictability of income to be received.
Afterwards, the more credit holders there are, the better conditions it is possible to obtain. This is because more than one person indicates more income, which reduces the level of default risk on monthly payments. The same occurs if there are guarantors, providing an additional guarantee.
It is important to be informed about the entire housing credit process beforehand, before moving forward with the hiring, in order to make the best decision for you. The more you know, the better you decide and the more you can save. For this, you can opt for the help of a credit intermediary, like those at Poupança no Minuto, who take care of all the paperwork with the banks and clarify all your doubts, through a free and personalized service.