Developer Funding in Portugal’s Housing Market

Some prospective homebuyers in Portugal who are having trouble securing a bank loan now have the option of getting funding from the property developer. Portuguese property agent Infinito …

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Some prospective homebuyers in Portugal who are having trouble securing a bank loan now have the option of getting funding from the property developer. Portuguese property agent Infinito Real reports that some borrowers are being given the opportunity to finance with the developer, typically for a short period of time while the buyer seeks to rent the property, resell it or gain bank financing in the near term. Analysts note that people with good credit and little debt are having no trouble finding funding for as much as 80% of the purchase prices, whereas others have trouble finding financing for half the costs. For more on this continue reading the following article from Property Wire.

Infinito Real, a Portugal based property agent, has found that with bank lending continuing to be the main stumbling block in the Portuguese property market, investors and developers are now looking at new ways in which to side step the banks allowing them to secure a deal.

‘The demand is there but financing is still proving difficult. However, recently we have seen a few savvy developers offering an alternative method of funding to avoid the stumbling block of acquiring finance from the bank, thus helping to get the property market moving,’ said Stephen Anderson, managing director of Infinito Real.

‘The idea involves buyers putting down an approximate 30% deposit and then spreading the remainder of the payment to the developer over a period of years agreed with the developer and depending on the client,’ he explained.

Once the client pays the deposit they will sign the deeds, meaning they own the property and can rent it or use it however they wish. The offer is interest free with regular payments due over the term of the contract, but this deal is currently only available with a few select developers throughout the Algarve.

‘This developer funding method is aimed at a variety of investors but is generally ideal for those people who are able to get finance in 12 months, just not now. For example, many clients have the funds to pay a high mortgage but still cannot qualify. Some investors may want to recoup rental income to cover the instalments and pay the property off quicker. There are also those who want to wait and see if they can sell the property within that period of time, and also others that are waiting on a house sale to come through, or investment to mature. This alternative funding is ideal in all of these scenarios,’ added Anderson.

He points out that the only other viable option available at present for those that want to make a purchase in Portugal but require the funds to do so, is to refinance a UK property. ‘A common option now is for purchasers to use funds from the UK and reserve the option to refinance in Portugal at a later date, when the banks are lending more freely,’ he said.

‘Banks are still lending to those that have very little debt elsewhere and have considerable income levels, so for those clients options are still available up to 80% of the purchase price. However for self employed or existing property owners by example, it can be difficult to finance anything over 50%,’ he added.

This article was republished with permission from Property Wire.

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