What they are and the various schemes

Entering into a home loan is one of the most important financial commitments in people’s lives, due to the high amount involved and the long duration of the agreement.

Home loans cover credit agreements intended for the:

  • Acquisition or construction of permanent or secondary residential property or residential leased property;

  • Acquisition or maintenance of property rights on existing or projected land or buildings;

  • Payment of the downpayment for the future acquisition of permanent or secondary residential property or residential leased property.

This is typically a long-term loan, in which, in general, the mortgage of the house is given as a guarantee of repayment.

There are other mortgage loans, concluded with consumers, which are subject to the same rules as home loans:

  • Credit agreements which, not corresponding to a home loan, are guaranteed by a mortgage or other equivalent collateral usually used on real estate, such as consolidated credit or loans in which the purpose of the borrowed amount is not defined;

  • The leasing of real estate for permanent or secondary residential property or residential leased property.

There are some home loan schemes that are subject to special rules:

 

Credit scheme for people with disabilities

Persons with disabilities with a degree of incapacity equal to or greater than 60% can enter into home loan agreements covered by the subsidised housing credit scheme for persons with disabilities (Law No. 64/2014).

Institutions are not obliged to grant loans under this special scheme. However, customers are entitled to convert their loan when the acquisition of the degree of incapacity equal to or greater than 60% occurs after the conclusion of the home loan agreement.

The access to and permanence in this loan scheme depend on the fulfilment of the following conditions by the interested parties:

  • They have to be over the age of 18;

  • They must have a degree of disability equal to or greater than 60%, as established by a medical certificate of multipurpose disability;

  • The loan is not intended for the acquisition of property owned by ascendents or descendants of the person concerned;

  • No member of the household has another loan on any subsidised loan scheme;

  • The mortgage is established on the financed property, which cannot be sold for a minimum period of five years (except in case of unemployment, death of the holder, change in the size of the household or professional mobility).

Loans granted under this scheme may be used for the:

  • Acquisition, extension, construction or execution of ordinary, extraordinary and improvement works in the permanent owner-occupied housing (including the acquisition of an individual garage or parking space in a collective garage);

  • Acquisition of land and construction of property for permanent owner-occupied housing (including the construction of an individual garage);

  • Execution of ordinary, extraordinary or improvement works in common parts of buildings designed to comply with the technical standards required by law to improve the accessibility of residential buildings by owners of autonomous units that constitute their permanent residence, and whose responsibility falls under the condominium owners.

The loans covered by this loan scheme benefit from an interest rate subsidy equal to the difference between (i) the reference rate for the calculation of subsidies, established by Ordinance No. 502/2003, of 26 June, or the interest rate contracted when it is lower than the reference rate for the calculation of subsidies; and (ii) 65% of the reference rate of the European Central Bank.

The maximum amount of the loan is EUR 190,000 (in 2015, updated annually on the basis of the consumer price index) and cannot exceed 90% of the appraisal value of the house or the cost of ordinary, extraordinary or improvement works (loan-to-value).

Loans covered by this scheme have a maximum maturity of 50 years.

It is not compulsory by law to take out life insurance but, as in the general home loan scheme, the credit institution may request the subscription of this type of insurance, under the principle of contractual freedom between the parties.

Bank customers may have more than one loan under this scheme in the following situations:

  • Duly justified need for expansion or improvement of housing constructed or acquired with the first loan;

  • Need to acquire or construct new housing because the housing constructed or acquired with the previous loan has become inadequate because of a change in the household or transfer of the work place.

In such cases, the total amount of the loans may not exceed the maximum amount applicable to the loans covered by this scheme, nor exceed 90% of the appraisal value of the house or the cost of ordinary, extraordinary or improvement works.

Should customers have acquired a degree of incapacity equal to or greater than 60% after entering into a home loan agreement for owner-occupied housing, they can switch their loan to the subsidised loan scheme for people with disabilities.

In order to migrate to this scheme, they must complete the other access conditions and submit an application to the credit institution to request such a change.

The change from the general scheme to the subsidised loan scheme for disabled persons is only allowed up to a maximum amount of EUR 190,000 (in 2015, updated annually on the basis of the consumer price index) and provided that the ratio of the outstanding capital and the value of the property does not exceed 90% (loan-to-value ratio).

In addition, the term of the loan covered by this scheme will take into account the number of years elapsed of the previous loan and the sum of the maturities of the two loans cannot exceed 50 years.

Loan scheme for the disabled from the armed forces

Disabled persons from the armed forces with a degree of incapacity equal to or greater than 60% may enter into agreements for the acquisition or construction of owner-occupied housing under the same conditions established for employees of credit institutions (Law No. 63/2014).

These conditions are set forth in Section V of the Collective Wage Agreement for the Banking Sector (“ACTV”).

Institutions are not obliged to grant credit under this special scheme.

 

Subsidised loan schemes

The ordinary subsidised loan scheme and the subsidised loan schemes for young people are still applied to some old home loan agreements. Since September 2002, it is no longer possible to enter into new housing loans under these schemes.

Holders of agreements concluded prior to the revocation of these schemes must declare the composition of their household annually to the credit institution.