Financing rural land in Portugal. Is it possible or not?
This is undoubtedly one of the questions I receive most often.
The most obvious answer would be to simply say no and close the subject. However, in the world of credit intermediation, things are rarely that straightforward.
One of the first lessons in the financial sector is to avoid the words always and never. Every case has its own framework, and there are banking products and structures that, when used properly and with full transparency, can create solutions that initially seem unlikely. It is also important to highlight that the banking system is dynamic. What makes sense today may no longer apply in the future. Criteria change, products evolve, and risk policies are
constantly adjusted to economic conditions.
Our commitment is twofold. On one side, to be clear and rigorous with the banks we work with. On the other hand, to provide an excellent service to our clients, helping them understand the system, identify the right banking products, and achieve their main objective, ideally under the best possible conditions.
To understand when financing may or may not be possible, it is essential to distinguish between the different types of property registrations in Portugal.
Urban property. In most cases, this type of property can be financed through a standard residential mortgage, provided it meets the usual banking criteria regarding valuation, income, and risk assessment.
Rural or agricultural property. As a general rule, this type of property is not financed by traditional banks. This is often where the conversation ends, but it does not always have to.
Mixed property. This includes both an urban component and a rural component under the same registration. It is precisely in this scenario that there may be room to structure the operation strategically.
Some banks are willing to finance only the urban component of a mixed property. In such cases, the rural part is excluded from the financing calculation. The mortgage request focuses solely on the urban article. If the urban component represents a significant portion of the total value, the required equity contribution may be considerably reduced. From the bank’s perspective, the loan-to-value ratio remains conservative, while for the client, it may effectively enable the acquisition.
There is also a specific banking product currently available that allows financing of up to 80% of the total value of a mixed property, considering both the urban and rural components together. This solution can be particularly attractive for clients with foreign income, which is also typically the maximum LTV accepted in such cases.
Finally, there is a different solution in the Portuguese market, similar to the concept of equity release, known locally as a Multi-Options Credit facility. The interest rates are very close to those of a standard mortgage with collateral. To be eligible, the client must own an urban property in Portugal, preferably free of charges. If there is an existing mortgage, it may still be possible to register a second charge, provided that the overall indebtedness after the new financing ideally does not exceed around 60% of the property’s value. In some scenarios, this structure may allow the purchase of a rural property with a financing level very close to 100%.
As you can see, understanding banking products in depth makes a real difference. Our role is precisely that. To simplify, structure the process correctly and add genuine value.
If you are wondering whether financing the purchase of your dream countryside property could be possible, feel free to get in touch. I would be pleased to analyse your situation.
Shall we simplify it together?