Is 100% financing on a mortgage possible?
Is it possible to buy a house being 100% financed by the bank? Currently, there are limits to the amount that banks can lend. But there is one exception. We explain which in this article.
What is the maximum ceiling that banks finance?
Since 2018, banks have changed the maximum loan ceilings for properties bought through mortgages. Before this date, banks could lend 100% of the house's value, but now it is no longer possible.
The Bank of Portugal has imposed new limits on the loan-to-value (LTV), limiting the percentage of value that banks can lend. For own and permanent housing, banks can lend up to 90% of the property value, and for secondary housing, up to 80% of the value. In other words, if the property you want to acquire costs 200,000 euros, for primary housing, you must give at least 10% of the value (20,000 euros), and for secondary housing, 20% of the value (40,000 euros).
However, note that the LTV is applied on the lower property value between acquisition and evaluation. For example, if a property is acquired for 200 thousand euros but evaluated at 180 thousand euros, in the case of the first home, you have to pay 10% of the lower value (18 thousand euros).
Note also that the 10% is the minimum ceiling that banks can charge, and they can ask for more than that. It will depend on your financial profile as a customer. They may offer better conditions, the less risk of default there is.
Is there a way to get 100% financing?
Currently, there is an exception provided for by law that allows obtaining financing or an LTV of 100%. If a property is under the ownership of a financial institution, such as the bank, having been seized, it is possible to buy the house through fully financed credit. In order to do this, it is necessary to contract the housing credit with the entity that owns the property.
This happens because, as a rule, the bank wants to sell the properties it owns, as they have been seized from other customers. These debtors have defaulted, so the bank initiates an executive action to sell the property and settle the debt. Settle the debt.
Can I hire a personal loan for the initial payment?
No, by law it is not possible to hire a personal credit for the initial payment of the housing loan.
Once the law imposed limits on LTV, with the goal of protecting banks from the risk of customer default, when carrying out two loans, the risk remains.
In other words, having two contracted credits increases a client's effort rate, and the risk that banks are exposed to is the same as if they granted 100% financing for the property.
Therefore, granting a personal loan as a complement to the mortgage is currently illegal and contrary to what is intended by law.
How to obtain maximum bank financing?
To get the maximum bank financing, you need to meet certain requirements so that the institution considers your loan low risk.
The higher the level of risk and non-compliance, the less funding the bank provides. Therefore, if you have a solid financial profile, you can achieve the maximum LTV limit that the bank can reach depending on the property purpose.
In other words, it is advisable that your debt-to-income ratio (weight of credit charges in net monthly income) is within the ideal percentage. The maximum limit that banks allow for the debt-to-income ratio, according to the instructions of the Bank of Portugal, is 35%.
In addition, it is also required that the proponent has a permanent professional contract, as it indicates greater stability and predictability of income to be received.
After, the more holders the credit has, the better conditions can be achieved. This is because more than one person indicates more income, which reduces the risk level of default on monthly payments. The same happens if there are guarantors, providing an additional guarantee.
It is important to be informed about the entire housing credit process in advance, before proceeding with the contracting, in order to make the best decision for yourself. 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 from Poupança no Minuto, who deal with all the paperwork with the banks and clarify all your doubts, through a free and personalized service.