If you are not eligible for the State’s public guarantee when buying a house—either because you are over 35 years old or because, despite being under 35, you don’t meet the conditions for its granting—there is another way to secure 100% financing: purchasing a home from a bank’s portfolio.
How do banks acquire properties for their portfolio?
The properties held in banks’ portfolios result from defaults on home loans previously granted.
When a bank provides a mortgage loan, it places a lien on the property as collateral for the loan amount. If the borrower defaults and no agreement is reached during debt renegotiation, the bank enforces the lien, taking ownership of the property for the amount of the outstanding debt, which is then considered settled.
Banks put properties up for sale
Since banks are in the business of money, not real estate, they aim to sell these properties as quickly as possible to recover the loaned funds. To ensure a speedy sale, banks offer certain incentives to buyers, one of which is 100% financing for the property.
100% Loan-to-Value Financing
When granting a mortgage loan for primary residences, the Bank of Portugal caps financing at 90% of the property’s value. However, this limit does not apply to properties in the banks’ portfolios.
In fact, when the property belongs to the bank, the Bank of Portugal allows 100% financing as a means to facilitate the sale. This means that if you want to purchase one of these properties, you won’t need to make an initial down payment, as the loan can cover the full value of the property.
Other Advantages
In addition to 100% financing, banks offer further benefits to attract buyers:
No Property Appraisal Costs
Since the property is already owned by the bank, the appraisal is already done, meaning you won’t need to pay for it. This is an additional saving compared to purchasing other properties.
Properties May Be Priced Below Market Value
Because the bank acquires the property for the outstanding debt amount and is eager to sell it quickly to recoup its funds, these properties are often listed below market value. This could be an excellent opportunity for you to secure a great deal.
Lower Spreads
Another incentive banks may offer is reduced spreads, allowing you to pay less on the loan over time, which makes the purchase even more attractive.
Bank-Owned Property Listings Are Public
You can find these properties listed through various channels, including:
- Banks’ official websites
- Real estate agencies’ websites
- Real estate platforms
- Branches of financial institutions
