Mortgage options to buy a house in Portugal
Check how to get a mortgage in Portugal when buying a residence under the sun.
Portugal has become a popular destination for British property owners, with over 50,000 Brits living in the country. But Brexit has the potential to throw a big spanner in the works; besides seeing an end to the automatic right to residence, it could change holiday home owners' tax liabilities.
One thing will be unchanged. There'll be no restriction on buying or owning a property. Portugal has not imposed restrictions on individuals of any nationality owning property, though it does have higher rates of property taxes imposed on owners resident in specified tax havens.
While Brexit will end British citizens' Freedom of Movement rights, it looks likely that Portugal will introduce relatively relaxed arrangements for residence. Antonio Costa, Portuguese PM, has said he will ensure that the rights of British citizens who live or invest in Portugal will be respected. Portugal's links with Britain go back a long way - to the Treaty of Windsor in 1386, long before the EU was thought of - and Costa also knows that the Portuguese economy depends on tourism and construction, particularly in areas like the Algarve.
However, we still don't have chapter and verse on what rights Brits will have. The withdrawal agreement with the EU should guarantee residence for Britons who move to EU countries before Brexit. If there's a transition period, you would have till the end of 2020 to move and still benefit from your EU residence rights; otherwise, you have till March 29th, 2019. But in the case of a no-deal Brexit, no one knows what rules will apply.
That means if you want to move to Portugal, it's probably best to start looking for a property now. It only takes an average 6-8 weeks in Portugal from making an offer to completing on a purchase, but you will also need some time to register for residence, organise healthcare, and so on. You'll need to apply for a residency permit (Autorização de Residência) once you've been in Portugal for three months; that will be easier to do while Britain is still in the EU (bringing forward the deadlines to the end of 2018 and September 2019 depending on whether there's a transitional period or not).
If you need to sell a UK property, you might find it difficult to do so in time. There are two ways round it; rent the place out, or - if you have cash or unused borrowing power - buy a small and cheap property in Portugal, and move quickly. You could even just rent a place in Portugal while you look for your dream home. That takes all the pressure off.
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Once you've lived in Portugal for five years, you'll be entitled to permanent residence status, and after six years, you can apply for Portuguese citizenship (as long as you've learned Portuguese). Since Portugal allows dual citizenship, you can retain your British passport while becoming an EU citizen again.
It's worth pointing out that as things stand, though British citizens will have the right to continue to reside in the EU country they have made home, they won't have full freedom of movement after Brexit. So make sure you really do want to commit to Portugal, as you won't be able to change your mind and move to France or Spain instead.
For those buying a holiday home, and not intending to reside in Portugal full time, currently things don't look likely to change much. There will probably be a bit more paperwork to do, such as the visa waiver ETIAS scheme. It's worth noting, though, that you'll be limited to 90 days in any 180 spent within the Schengen area - not just Portugal. That could pose problems for those who regularly travel within the EU for work.
There is one solution to all these issues - the 'Golden Visa' scheme. If you buy a property worth more than EUR 500,000 (or EUR 350,000 for redevelopment in an urban renovation zone), you can gain residency rights via this programme, for one year, renewable twice for two years. At the end of the five years, you'll get permanent resident status. However, the scheme does have a cost (a few thousand euros on top of your investment).
Besides residence, Brexit will have some other impacts. For instance, if you're relying on a UK pension for your income, or taking out a Portuguese mortgage on a holiday home, you need to think about currency - in the event of a no-deal Brexit, some analysts are saying the pound could fall 20-30%. If you want to move full time, but are renting in Portugal as a first move, it might make sense to open a euro account for your savings, to ensure they retain their value.
There are also a couple of tax impacts for holiday home owners. Currently Brits who own holiday homes in Portugal benefit from EU provisions which bar member states from imposing a higher rate of income or capital gains tax on citizens of other EU states. Once Britain leaves the EU, Portugal would become able to impose a higher rate of tax on British owners - for instance, if you rent your holiday home out, you might have to pay a higher rate than before. (British Portuguese-resident owners will also be unable to benefit from one specific tax exemption if they repatriate; currently, if proceeds from selling your main residence are reinvested in another home within the EU or EEA, they're exempt.)
Brexit certainly won't put an end to Brits moving to Portugal or buying holiday homes there. But even though the details aren't yet clear, it's practically certain that if you want to move, you'll have a lot less paperwork to do if you get your move over before Britain leaves the EU.