When applying for a mortgage in Portugal, the concept of Loan-to-Value (LTV) — known locally as rácio LTV — determines how much of the property's value a bank is willing to finance. Understanding this ratio is essential for budgeting your property purchase.
Current LTV Limits in Portugal
The Banco de Portugal (BdP) regulates LTV caps under Recommendation 0007874. As a general rule: residents purchasing a primary residence can borrow up to 90% LTV; residents purchasing a secondary home or investment property are capped at 80% LTV; non-residents are typically limited to 70% LTV regardless of property type.
How LTV is Calculated
The LTV ratio is based on the lower of two values: the purchase price or the bank's own property valuation. If a bank values a property at €300,000 but you agreed to pay €320,000, the bank will base its loan on €300,000. At 80% LTV, the maximum loan would be €240,000 — regardless of the agreed purchase price.
What This Means for Your Down Payment
If you're a non-resident buying a €400,000 property, you'll need at least 30% down — that's €120,000 in equity, plus transaction costs (IMT, IS, notary, legal fees) which typically add another 6–8% on top.
Can You Negotiate a Higher LTV?
In some cases, yes. Banks may offer slightly different terms for premium clients, or for properties with strong valuation fundamentals. A broker can advocate on your behalf and identify which lenders offer the most flexibility.
Understanding LTV early helps you plan your finances realistically — and avoid the unpleasant surprise of being short on closing day.