Mortgage rate discounts in Portugal: are they worth it?
For home loans in Portugal only — offers from Portuguese banks, under Portuguese taxes and fees. The banks’ documents will still be in Portuguese; this page explains them in English.
A bonificação — a discount on the spread for taking the bank’s products — is only worth it if the interest it saves is more than the cost of those products, for as long as you keep them. As a rule of thumb: a 0.20 percentage point discount on a €200,000 loan saves about €400 of interest in the first year, and less each year after, as the balance falls. If the products cost more than that a year, the discount is a bad deal.
Updated
What a bonificação is
A cut in the spread in exchange for taking the bank’s products: having your salary paid into the account, buying its life and home insurance, holding a credit card, a pension plan (PPR) or another investment, keeping direct debits active. Portuguese law calls these optional bundled products (vendas associadas facultativas): the bank may offer them, but cannot make them a condition of the loan.
How to do the sum
- Work out the interest saved: the spread discount times the outstanding balance, each year. It is largest at the start and falls with the loan.
- Work out the cost of the product: what you pay for it over the alternative. For life insurance, the difference from an outside policy with the same cover; for a card, the annual fee; for a pension plan, what the money would have earned elsewhere.
- Compare the two over the years you expect to keep the loan, not only the first.
Salary domiciliation is almost always worth it: it costs nothing if you bank there anyway. Insurance is where the sum most often turns — the bank’s life premium rises with age, while the interest saved falls with the balance.
All or nothing, or product by product
At some banks the discount is a package: take every product or get none of it. At others each product is worth part of the discount and you can pick only the ones that pay. The FINE does not always make this clear — ask what each product is worth, one by one.
If you want out later
You can cancel the products at any time. The bank cannot touch the rest of the contract, but it withdraws the matching discount and the spread goes up. Before signing, find the spread without each product in the FINE: that is what you will pay if you ever drop them.
Life insurance is yours to choose: the bank may require the cover, not its own policy. You can switch to an outside insurer even after completion, as long as the cover stays the same — losing, where it applies, the discount that came with the bank’s policy.
Seeing the discount with its price beside it
qualcredito.com shows each discount next to the cost of the product that buys it and says, for your scenario, whether the offer is cheaper with or without it. You can switch each product on and off and watch the cost of the loan change.