The documentation required varies from bank to bank, but the essential documents for a standard application for this type of loan are:

• Citizen card or identity card and tax card;
• Latest income tax return and settlement note;
• Photocopy of the last 3 pay slips;
• Statement from your employer;
• Location plan of the property;
• Floor plan of the building or flat;
• Proof of other income.

Other documents may be required, depending on the bank and the customer's specific situation (whether they are a pensioner, employed, non-resident, etc.).

It is not mandatory to have an account with the institution from which you wish to take out the loan. However, most banks require this.

The spread is a percentage of the interest rate charged by the bank, which is essentially its ‘profit margin’.

EURIBOR (Euro Interbank Offered Rate) is a rate that results from the average interest rates on loans between banks. EURIBOR is a variable rate that is renewed in credit agreements every three, six or twelve months. Normally, mortgage agreements in Portugal are indexed to EURIBOR.

Nominal Annual Rate (NAR) is the rate communicated by banking institutions and applied to all types of transactions, whether financial investments or loans involving interest payments. In the case of variable-rate mortgages, this is simply the sum of the spread and the EURIBOR.

The APR can be used to compare credit offers. For credit offers with the same amount, term and repayment method, the offer with the lowest APR is the cheapest for the customer.

The APR calculation includes:

• interest;
• commissions;
• expenses, namely taxes and fees related to mortgage registration, in the case of a mortgage-backed loan;
• insurance required to obtain the loan;
• current account maintenance fees, which must be opened to manage the loan;
• the remuneration of the credit intermediary, if this remuneration is paid by the consumer, which is the case when using an independent credit intermediary;
• other charges associated with the credit agreement.

It does not include:

• amounts payable if the customer fails to comply with the obligations set out in the agreement;
• early repayment fees;
• notary fees.

The total amount charged to the consumer (MTIC) is particularly relevant when taking out a loan. Throughout the term of the loan, the interest rate or other charges may change.

For example, in loans taken out at a variable or mixed interest rate, the MTIC is only indicative. As the interest rate on these loans may vary over time, the MTIC may not correspond to the total amount that the customer will pay during the term of the loan.

If the other characteristics of the credit are similar:

A credit with a higher interest rate will have a higher MTIC, as the interest paid will be higher;

A longer-term loan will have a higher MTIC, because you will have paid more interest on that loan than on a similar loan with a shorter term.

You can use the MTIC to compare offers. For the same amount and term, the MTIC allows you to compare the amount of interest and other charges you will have to pay when you repay your loan.

As a guarantee against the risk associated with financing, there are two types of insurance that banks always require when applying for a mortgage: life insurance and comprehensive home insurance.

Life Insurance

Although not required by law, life insurance is always required by banks when granting a mortgage.

In simple terms, this insurance covers the outstanding amount of the loan in the event of the death or disability of one of the holders, which protects both the customers and the bank.

Multi-risk Insurance

Going beyond Portuguese legislation, which requires properties under horizontal ownership to have fire insurance, banks require multi-risk insurance to be taken out in order to grant mortgage financing. This type of insurance provides broader coverage which, in addition to protection against fire, should also include coverage for natural phenomena, civil liability, floods, electrical risks and seismic phenomena, among others.