Can I apply for a construction loan, or only to buy a ready home?

Can a home loan be used to build?

Yes. Home loans cover both buying and building a home. It can be the home you will live in, a second home or a home to rent out. They also cover buying land.

As a rule, the guarantee is a mortgage. With construction, the mortgage can include the land.

How much will the bank lend?

The same Banco de Portugal rules apply as for a purchase:

• up to 90% of the value, for the home you will live in;
• up to 80% of the value, in other cases;
• an affordability ratio of up to 45% of net income;
• a term of up to 40 years if you are 35 or under, and up to 35 years after that.

For a home to live in, the ESIS must simulate a fixed, a mixed and a variable rate. The home purchase simulator works out your affordability ratio.

How is the money released?

In practice, the bank releases the money in stages, called tranches. Before each tranche, a surveyor from the bank inspects the work. When the work is finished, the loan becomes a standard home loan.

So you pay on the amount already released, not on the total approved.

An example with the sums

The bank approves €200,000 at 3%. In the first stage, it releases €60,000. One month's interest on €60,000 is about €150, because 60,000 × 3% ÷ 12 = 150.

Once the full €200,000 is released, one month's interest rises to about €500. Your repayment goes up as the work progresses. These are example figures.

Which documents are needed?

More than for a purchase, and that is normal:

• ID, tax number and tax returns for the last 2 years;
• tax record and land registry certificate for the plot;
• architectural project approved by the local council;
• works budget, signed by the builder;
• building permit, or the application in progress.

The bank values the land, the project and the expected value of the finished home. The valuation is done by an independent valuer registered with the securities regulator (CMVM).

What should I watch out for?

Building work can run late or cost more than planned. Keep a margin for this. Agree with the bank a tranche schedule that fits your building plan.

Where FINOVA helps

We gather the project, the budget and the building schedule, and take your case to several banks. See the construction loan page. Our fee is paid by the bank.

Before you go ahead, see the guide What is the effort rate, and what should mine be?

Sources

• Banco de Portugal — Home loans: what they are and the various schemes
• Banco de Portugal — Creditworthiness assessment
• Banco de Portugal — Guarantees
• Banco de Portugal — Interest rates in home loans

Sources checked on 22 September 2026.