If you open your bank statement and wince at your mortgage payment, you are not alone. Many families in Portugal have seen their mortgage payments rise in recent years, with Euribor hovering around 3% (well below the 2023 highs, but still above the rate many people signed up for).
The good news is that finding ways to reduce your mortgage payments doesn’t always require drastic measures. Often, the relief lies in details that go unnoticed: an outdated spread, expensive insurance or costs that have built up over the years.
In this article, we’ve put together eight practical ways to ease the monthly strain. Some are quick and easy. Others take some careful number-crunching. Let’s get started.
8 ways to reduce your mortgage payments
1. Renegotiate the spread with your bank
The spread is the margin that the bank adds to the Euribor. If you took out the loan several years ago, you may be paying more than the rate currently offered to new customers.
Arrange a meeting with your bank manager and ask for a review. Even a 0.2% cut can make a difference over the decades.
2. Move your mortgage to another bank
If your bank won’t budge, you always have the option of transferring the loan to another institution offering better terms. Many banks run promotions featuring no fees, free valuations and lower spreads.
Compare carefully and work out the total cost of switching. A well-planned switch can mean immediate savings.
3. Review your mortgage life insurance
This is often the quickest saving of all. Most contracts use the bank’s own life insurance, which is usually more expensive than the alternatives on the market.
You can switch insurers without changing your mortgage, provided the new policy meets the bank’s requirements. We explain this in detail in our article on mortgage life insurance.
4. Make partial repayments
Whenever you have some money to spare (an IRS income tax refund, your holiday or Christmas bonus, a PPR retirement savings plan you have cashed in), consider paying off part of the outstanding balance. You can choose to lower your monthly payment or shorten the term.
Even modest sums make a difference over time, and the fees for these early repayments are capped by law.
5. Choose between a fixed and a variable rate
If the volatility of variable-rate mortgages is keeping you awake at night, a fixed-rate mortgage offers predictability. On the other hand, a variable-rate mortgage may prove more advantageous when interest rates fall.
There’s no single answer: it depends on your circumstances and the timing. It’s worth asking for a simulation of both before you decide.
6. Have the property revalued to improve the LTV
The LTV (loan-to-value) is the ratio between the amount you still owe and the current value of the property. If the property has increased in value, this ratio improves, as does your risk profile.
A lower LTV may justify renegotiating the spread. Ask for a new valuation and take the figures to the bank.
7. Look for hidden costs in your mortgage payment
Your mortgage payment may include much more than principal and interest: related insurance, fees and products you agreed to when you signed. Ask the bank for a detailed breakdown and see what you can cut.
8. Speak to a credit broker
A licensed credit broker, registered with the Banco de Portugal (the Portuguese central bank), can compare offers from several institutions on your behalf. Platforms such as ComparaJá or Doutor Finanças can help you run a no-obligation simulation.
Don’t wait for the bank to take the initiative. Start with the simplest steps (reviewing your insurance and asking for a breakdown of your mortgage payment) and move on to renegotiating with the figures in hand.
Every situation is unique, so before making a decision, seek advice from a qualified professional. A small adjustment today could ease your budget as early as next month.
Raquel Correia
