Nov 1, 2022·edited Nov 1, 2022Liked by Nancy Whiteman
We just closed on a house yesterday and went through the mental gymnastics of a loan. First issue was life insurance. We are both 52 and life insurance for the mortgage was 700 euros a month on a 340k loan. We opted to put down 35% to dismiss the life insurance requirement. Next decision was variable or fixed. Variable is the 360 euribor 6 average plus .95% spread which is 2.5%. The fixed rate offered was 4.2%. I did some research and the historical euribor 6 rate has been over 4% only twice in the EU history. 2000-2001 and 2007-2008. Each time for only about a year. So we went with the variable rate. When you work in the 1.5% delta in the pre payment penalty we felt we had a good cushion.
It’s also worth noting that a fixed rate mortgage in Portugal doesn’t necessarily mean the rate is fixed for the entire duration of the mortgage - when we were looking in 2019, for a 30-year mortgage no bank would offer a fixed rate for more than the first 5 or 10 years. Then it becomes a variable rate. Very different than the US!
Nov 1, 2022·edited Nov 1, 2022Liked by Nancy Whiteman
Just a note on your mortgage column -- most banks won't loan to Portuguese people from age 60 onward, vs 70 or even 75 for foreigners. Banks make exceptions for foreigners because, well, the assumption continues that foreigners are wealthy. Here's the rub. As a dual-national -- American and Portuguese, the bank won't give me a mortgage even with owning a business here, having two previous mortgages in Portugal (paid off), 20 years of PT credit history, offering 50% down, and US investment accounts. Banks: you're PT and too old at age 60. Yet they loan hundreds of thousands of euros to foreigners with 2-year temporary residency cards who could return to their country, default and PT banks could not recoup. Without a PT passport, banks would loan me up to 400k. Instead, it's zero. :-(
We are just starting out on this journey. So much more complicated than I hoped, but better rates than the US regardless of which one. Very bizarre if you pay off early you get penalized. So much I am learning I appreciate your posts!!
Nancy I love how simple you explain things. Understanding the mechanics of the European Union and their impact on Portugal May be a topic of interest along your blog. Obrigada
It’s like you keep addressing our journey each day! We have a cash offer in our intended house. We chose to buy something much smaller and cheaper than our budget with the idea that we likely couldn’t lose ( much) if for some reason we needed to sell. We see the correction coming but still had to put our bid in against 4 other prospective buyers, 3 with cash.
I will read this at least once more in an attempt to take it in, as I’d like to understand the implications. My eyes, and brain, have always glazed over when reading about markets, equity or bond, mortgage rates et al. I want to understand it but something in me keeps repeating “Blah. Blah. Blah. I don’t get it. I will never get it.” Thank goodness I am not in the market for real estate at the moment, in the U.S. or in Europe.
Thank you very much for another very informative post. We're purchasing a new off-plan attached home in Caldas and decided to pay cash due the onerous terms of mortgages available in Portugal.
It's always comforting to find a kindred soul. For my three US mortgages, I always went with fixed rate and like you, paid it off early. This time I'm using the windfall cash from selling the US condo. In addition to the unpredictable mortgage rate and inflation, there is also the currency exchange rate for me to consider. And my eyes, too, glaze over like the day-old doughnut in the shop window.
We just closed on a house yesterday and went through the mental gymnastics of a loan. First issue was life insurance. We are both 52 and life insurance for the mortgage was 700 euros a month on a 340k loan. We opted to put down 35% to dismiss the life insurance requirement. Next decision was variable or fixed. Variable is the 360 euribor 6 average plus .95% spread which is 2.5%. The fixed rate offered was 4.2%. I did some research and the historical euribor 6 rate has been over 4% only twice in the EU history. 2000-2001 and 2007-2008. Each time for only about a year. So we went with the variable rate. When you work in the 1.5% delta in the pre payment penalty we felt we had a good cushion.
It’s also worth noting that a fixed rate mortgage in Portugal doesn’t necessarily mean the rate is fixed for the entire duration of the mortgage - when we were looking in 2019, for a 30-year mortgage no bank would offer a fixed rate for more than the first 5 or 10 years. Then it becomes a variable rate. Very different than the US!
Just a note on your mortgage column -- most banks won't loan to Portuguese people from age 60 onward, vs 70 or even 75 for foreigners. Banks make exceptions for foreigners because, well, the assumption continues that foreigners are wealthy. Here's the rub. As a dual-national -- American and Portuguese, the bank won't give me a mortgage even with owning a business here, having two previous mortgages in Portugal (paid off), 20 years of PT credit history, offering 50% down, and US investment accounts. Banks: you're PT and too old at age 60. Yet they loan hundreds of thousands of euros to foreigners with 2-year temporary residency cards who could return to their country, default and PT banks could not recoup. Without a PT passport, banks would loan me up to 400k. Instead, it's zero. :-(
We are just starting out on this journey. So much more complicated than I hoped, but better rates than the US regardless of which one. Very bizarre if you pay off early you get penalized. So much I am learning I appreciate your posts!!
Nancy I love how simple you explain things. Understanding the mechanics of the European Union and their impact on Portugal May be a topic of interest along your blog. Obrigada
It’s like you keep addressing our journey each day! We have a cash offer in our intended house. We chose to buy something much smaller and cheaper than our budget with the idea that we likely couldn’t lose ( much) if for some reason we needed to sell. We see the correction coming but still had to put our bid in against 4 other prospective buyers, 3 with cash.
I will read this at least once more in an attempt to take it in, as I’d like to understand the implications. My eyes, and brain, have always glazed over when reading about markets, equity or bond, mortgage rates et al. I want to understand it but something in me keeps repeating “Blah. Blah. Blah. I don’t get it. I will never get it.” Thank goodness I am not in the market for real estate at the moment, in the U.S. or in Europe.
Thank you very much for another very informative post. We're purchasing a new off-plan attached home in Caldas and decided to pay cash due the onerous terms of mortgages available in Portugal.
is the redemption penalty calculated on remaining principal or the initial amount of the loan?
It's always comforting to find a kindred soul. For my three US mortgages, I always went with fixed rate and like you, paid it off early. This time I'm using the windfall cash from selling the US condo. In addition to the unpredictable mortgage rate and inflation, there is also the currency exchange rate for me to consider. And my eyes, too, glaze over like the day-old doughnut in the shop window.