Refinancing in Portugal?

[Henrique D.]

I'd like to apply to BRRRR method in Portugal but I'm struggling to understand how to do the refinance part. Unlike the US banking in Portugal is consolidated in a few banks which means that things that are common in the US like credit unions or local lenders are not found there.

Has anyone had experience in doing BRRRR with Portuguese lenders?

[Camila Wong]

Hi Henrique
I have the exact same question
Let me know if you have any information about that, i will do as well

[Mike Lambert]

@Henrique D.

@Camila Wong

You can refinance but you need to wait minimum 2 years after your purchase.

[Henrique D.]

Thank you for the answer @Mike Lambert! Is this called "hipoteca" or "crédito hipotecário"? I've found this link (in Portuguese) which seems to describe the refinancing process.

Do you know if the major banks are usually happy to do this? So for the buy and rehab steps, is the best strategy is to find an alternative lender (or use cash)? Any advice or places you can point me to would be greatly appreciated!

[Mike Lambert]

@Henrique D.

No worries. It'd be a hipoteca. Yes, they should be happy to do it and yes, you'll have to find alternative solutions for the buy and rehab.

[Camila Wong]

Thank you for the valuable information @Mike Lambert  

Aside from banks, is there other institutions we could get the refinance faster here in Portugal? 

[Mike Lambert]

@Camila Wong

You're welcome. Normally speaking, only banks give long term financing. You'd have to find a private lender to give you a bridge loan.

[Camila Wong]

Great
Thank you @Mike Lambert i really appreciate your help!

[Henrique D.]

Hi, @Mike Lambert I've been talking to some credit intermediaries to get some clarification on the various financing options available. And one of the things I've been told is that there is no seasoning for refinancing which contradicts what you said about the two year period. Can you provide more info on where you got that information? Could this be specific to a bank you spoke to or the property?

I received wrong information from people in the Portugal RE industry before so I'm not super confident the person I talked to is correct I'm just trying to get more data points.

In case it's useful for others these are some other bits of info I've learned

• Refinancing is possible but it is more expensive than conventional (usually the spread is 1-2% higher) and it is necessary to explain to the bank what will be done with the money.
• It is not necessary to wait to own the property for a certain time to obtain mortgage credit. This credit can go up to 30 years.
  
• An alternative to refinancing is to take out a loan for purchase and renovation, which requires a 30% down payment. The renovation budget can be artificially inflated so you can have a "cash pillow" for maintenance or anything else really.
  
• The conventional loan for purchase and rehab is the most commonly used by investors
  
• If you have a company it is also possible to apply for loans but it is necessary to have at least 6 months of activity. The maximum duration of commercial loans is 15 years.

[Jason Johnston]

Hi @Henrique Dantas have you been able to verify the points you mentioned above from a bank?

[Henrique D.]

Hi @Jason Johnston, no I haven't done it at this time. If/once I do I'll update this post. If you happen to know more information on this topic it would be great you could share it as well. The more data points the better.

[Pedro Morais]

Hi @Henrique D., I've been also speaking with banks to understand how a refinance of an investment property can be implemented. The feedback was the same as what @Mike Lambert said. Apparently you can do it with a "Crédito Multifunções" but there are some restrictions implemented by the Bank of Portugal:

• If the property was acquired less than 2y ago: This type of loan is limited to 80%-Loan To Cost (from what I understood rehab costs are not included).
• If the property was acquired more than 2y ago: This type of loan can be used until a max of 80%-Loan to value not limited to the acquisition cost.

Let me know if you had different feedback. 

[Henrique D.]

This is great, thanks for adding your experience as well. If I get more info at some point in the future I'll update this thread

[Victor Strid]

Hi @Henrique D. Have you moved forward with any investment and if so the BRRRR Method?
just getting started at looking at the best way to invest and scale in Portugal. Buy to let, and of course BRRRR would be ideal if possible. 

If anyone else have some advice feel free to jump in :) 

Thanks 

[Jaysin Anderson]

Hi Everyone - very helpful thread! My wife and I are also looking at BRRR investment opportunities in Portugal, specifically the Lagos area. After reading this thread I sent an email to my Mortgage Broker to get additional information about refinance options in PT and I'll share what I learn.
What areas of Portugal are you all looking to invest?

[Jaysin Anderson]

Hi Everyone - I asked my Mortgage Broker in Portugal (CAFIMO) about being able to use the BRRR method in Portugal (specifically calling out that we'd buy in cash, improve the home, and then refinance) and here is the response she provided:

If you buy it in cash you don’t need to wait for 2 year to get an home equity loan, however you wont be able to get the same Loan to value for this purpose, usually the bank goes to 50% of the property value only.

So it looks like like rather than the 70% LTV that's normal in the US, in PT it's 50%.

[Joshua Beneventi]

@Jaysin Anderson great information. If I may suggest, try reaching out to Hugo Pinheiro at "Credível" as well for a second opinion, just for due diligence's sake, and see what he says. Cheers!

[Joshua Beneventi]

@Jaysin Anderson I would also suggest you reach out to @Ricardo Matos; he is an educator, investor, and friend of mine here in Portugal who will have some good insight regarding BRRR here.

[Jaysin Anderson]

Thanks for making the connection @Joshua Beneventi!  Ricardo I'll send you a message directly.

[Carlos Lopes]

Hello Guys, i also had that question myself.
This year i bought my first MultiFamily Properety in Leiria and i want to scale it as quick as i can. 

My plan was to do the BRRRR Method, but it looks it its not that easy here in Portugal, what you guys think its the best way here? I Can do the BRRRR or i need to find another solution like an "Hipoteca"

Thanks.

[Chris Barrett]

I have a call with CAFIMO tomorrow, and while I'm not planning on doing a refinance based project right now, I'll ask about this and see what the broker has to say now. :) 

[Chris Barrett]

It's definitely more difficult to refi in Portugal, but it is possible. You'll probably pay fees and it'll be tougher to find a bank that would be willing to pull cash out for reasons other than direct improvements to the property. 

[Natalia Munoz]

Quote from @Chris Barrett:

I have a call with CAFIMO tomorrow, and while I'm not planning on doing a refinance based project right now, I'll ask about this and see what the broker has to say now. :) 

Chris I would like to have your take on working with CAFIMO. I'm currently starting to work with them, but would love to hear from other investors.

[Chris Barrett]

Quote from @Natalia Munoz:

Chris I would like to have your take on working with CAFIMO. I'm currently starting to work with them, but would love to hear from other investors.

@Natalia Munoz So I didn't end up working with CAFIMO, I am working with:  

Rafael Fonseca

Mortgage Broker - License #4525

I can give updates once we have finished the process :) 

[Joãozinho Sanona]

Thanks for that information Chris, sounds promising!

I am looking to pull out some equity from existing properties as well.
My current mortgage broker doesn't take them into account at all when talking to the banks they work with. Plus I only get quite high TAEGs offered currently...

Thanks everyone for the interesting discussion here!