Home loans in Portugal: do you know your debt-to-income ratio?

The debt-to-income ratio reflects the percentage of a household’s monthly income allocated to the repayment of all existing loans — not only the new mortgage.

However, when assessing a borrower’s creditworthiness, Portuguese banks apply a more demanding calculation: the DSTI ratio (Debt Service-to-Income).

This assessment considers:

• the monthly instalments of all outstanding loans;
• a potential increase in the new mortgage instalment following an interest-rate rise;
• a possible reduction in income when the agreement extends beyond the borrower’s 70th birthday.

From 1 August 2026, Banco de Portugal will reduce the recommended DSTI limit for new credit assessments from 50% to 45%.

In practical terms, this may result in:

• a lower maximum loan amount;
• a higher initial deposit;
• the need to repay other loans before applying;
• a greater impact of the borrower’s age and income stability on the bank’s decision.

Financial institutions will retain a limited margin of discretion: up to 10% of the total amount of credit granted in each six-month period may exceed the 45% DSTI limit.

This exception does not, however, give an individual borrower the right to have a loan approved.

Likewise, remaining below 45% does not guarantee financing. Banks will continue to assess income, employment stability, credit history, age, property value and the household’s other financial commitments.

Before entering into a binding agreement to purchase property in Portugal, it is essential to understand your financing capacity and ensure that the transaction is legally protected.

Do you know your debt-to-income ratio?

Source: Banco de Portugal — Macroprudential Recommendation applicable from 1 August 2026.

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