Bank property valuation in mortgage credit

Key points

This guide explains the role of the bank valuation in mortgage credit, the financing limits recommended by Banco de Portugal, and what to do when the valuation does not match the negotiated price.

1. What the bank valuation is for

Before granting a mortgage, the bank commissions an independent valuation of the property to estimate its market value. This value, rather than only the price agreed between buyer and seller, is used to calculate the maximum financing amount.

The valuation protects the bank by confirming the property is worth enough to secure the loan, but it is also useful for the buyer, providing an independent second opinion on the negotiated price.

• Understand that the valuation is carried out by an independent entity hired by the bank.
• Confirm that the valuation, not just the price, determines financing.
• Use the valuation as a second opinion on the negotiated price.

2. Who carries out the valuation and how it works

The valuation is carried out by an accredited surveyor hired by the bank, who prepares a full property report following technical criteria set by law, including a visit to the property to take photographs, measurements and record relevant data.

The valuation report considers factors such as location, layout, area, condition and local market characteristics. The buyer does not choose the surveyor but can usually request the report.

• Confirm the surveyor is accredited and hired by the bank.
• Expect a property visit as part of the process.
• Ask to see the valuation report.

3. The LTV ratio and recommended limits

The loan-to-value (LTV) ratio measures the proportion between the loan amount and the property's value — using the lower of the purchase price and the bank valuation. Banco de Portugal recommends a maximum LTV of 90% for buying a primary residence and 80% for other purposes, such as a secondary home.

These limits are macroprudential recommendations aimed at credit institutions, intended to reduce the risk of household over-indebtedness and financial instability. Since 1 August 2026, Banco de Portugal reduced the recommended debt service-to-income (DSTI) limit from 50% to 45% of household income across all combined loans, for creditworthiness assessments carried out from that date onward.

• Calculate LTV based on the lower of price and valuation.
• Confirm the LTV limit applicable to your situation (90% or 80%).
• Consider the recommended 45% DSTI limit in effect since August 2026 (previously 50%).

4. If the valuation is lower than the agreed price

When the valuation is lower than the price negotiated with the seller, the bank calculates financing based on the lower value, which can mean you need to cover the difference with your own funds to keep the deal.

In these situations, you can renegotiate the price with the seller, increase your initial down payment, or, in some cases, request a second valuation. Always assess the impact on your budget before proceeding.

• Confirm how the bank calculates financing when there is a gap between price and valuation.
• Consider renegotiating the price or increasing your down payment.
• Assess the impact on your budget before deciding how to proceed.

5. Creditworthiness assessment and the final credit decision

Besides the property valuation, the bank assesses the customer's creditworthiness — their ability to meet the loan's obligations — before making a final decision on financing and its conditions.

The combination of the property valuation and the customer's creditworthiness assessment determines not only whether the loan is granted, but also the amount, term and, in many cases, the spread applied.

• Understand that the final decision combines the property valuation and the customer's creditworthiness.
• Prepare the financial documentation needed for the creditworthiness assessment.
• Consider that the spread can vary depending on this combined assessment.