Nowadays, banks make a lot of money on insurance. Sometimes even more than on the mortgage.
To save some money in Cyprus, it is important to understand the intricacies of mortgage insurance.
First of all, you need to understand that according to law you can buy insurance from any company in Cyprus that has a special license. Therefore, make an electronic application in several organizations, indicating which bank you plan to take a loan. Calculate everything. And only then buy.
When you visit a bank and start talking to the manager about your future mortgage, you may trust them like a child.
On the one hand, this is correct, because professionals usually work there and the process is firmly established and reliable. On the other hand, when the day of the transaction is approaching, the price for insurance sometimes occurs to be quite high and is not always justified. If first you expect to pay 300 euros for insurance as it was initially announced at a personal meeting, then on the day of the transaction the amount suddenly doubles. And you will have to pay this amount annually.
In Cyprus, as well as in many other countries, insurance can be waived within 14 days from the date of purchase. You just need to make an application, send it to the company by e-mail. The money is returned to your account. The only thing is that you should not ask to cancel the insurance that affects the loan interest, as the bank will see it anyway, and you will have to recalculate everything and redo the contract.
What can and what can't you refuse?
Let's take a look at a number of legal instruments, thanks to which the mortgagee becomes more savvy in the matter of insurance. You need to understand what is included in each type of insurance and whether it really protects you. Also, as we have already found out, different banks may have different loan agreements. The lower the rate, the higher the requirements for the borrower under the contract.
Life and health insurance
This type of insurance is not required, but a bank has the right to significantly increase the interest rate on the loan to those borrowers who refused to have this type of insurance. This will be spelled out in the contract. In general, almost all banks in Cyprus require customers to have it.
According to the law, only the risks associated with disability and death are mandatory. Everything else can be discarded. It makes no sense to insure against flu, coronavirus or a broken leg if you are not a professional sprinter.
If necessary, or if there is a clear deterioration in health, you can extend health insurance. So just tell your bank representative: "Now I don't need full insurance, but I'll think about it when I am 60 y.o."
As a rule, it is more profitable to insure the life of the borrower than to increase the interest on the loan. Moreover, it saves heirs from unexpected encumbrances if the borrower has died. Such insurance costs an average from 100 euros to 600 euros per year.
Property insurance
Property insurance is a mandatory type of insurance according to law. As a rule, under this insurance, the borrower will not be able to reimburse the money spent on repairs. For example, if the neighbors flooded and the paint on the ceiling fell off. But this type of insurance will definitely save you from fire, earthquake, destruction of the structure of the house, including stairs, windows and doors.
The Bank may offer to expand the insurance and reduce the interest rate on the loan agreement. But only the borrower decides whether to do it or not. Note that prices may vary significantly in different banks and insurance companies.
This type of insurance is the most expensive. On average, it costs 300-1200 euros per year. A lot depends on the type of construction, age and purpose of the building.
Since Cyprus is located in a zone of increased seismic activity, this type of insurance should be approached with full responsibility. Sometimes it makes sense to insure against other risks. In 2012, a massive landslide occurred in the paradise village of Pissouri, Limassol, which significantly hooked several brand-new private houses bought on credit. Borrowers are still arguing with the government about who is right and who is not, but borrowers are forced to continue paying.
Titleinsurance
Insurance of ownership of purchased housing is not mandatory, but under a loan agreement, the level of interest rate sometimes depends on it. This point should be clarified in a specific credit institution.
An example from your grandmother's favorite TV series. The heir pops up from nowhere and demands through the court to respect his rights to the house sold by their dad twenty years ago. At the same time, the borrower under the loan agreement must continue to pay the loan. That's where title insurance comes to the rescue.
Job loss insurance
There is always a risk of losing your job, but insurance against this 'disease' most often does not affect the interest rate on the loan agreement in any way.
How do banks manipulate borrowers?
You are not a resident of the island. Of course, the loan agreements of different banks may differ significantly, but in general, the purchase of real estate with a mortgage in Cyprus is available even to those who do not live permanently on the island. At the same time, the market is actively developing and competitors want to sell properties to foreigners as well. Thus you can try to find a negotiable bank.
'Insure your mortgage exclusively with our bank'. Of course, it is more convenient for the lender, but they cannot demand it. Don't argue, just politely inform us that you have found a better insurance offer. But you would like to get a mortgage from this bank.
The bank insists on additional insurance. Listen to all the suggestions of the mortgage manager, thank them and with firm determination leave only those insurance items that you really need and are affordable for you at the moment.
Have you decided to buy an apartment or a house in Cyprus? Contact DOM! The website offers a huge selection of real estate — residential and commercial. Experienced agency specialists will be happy to help you make the right choice.
See also:
- How to remotely buy a property to quickly get permanent residence and move to live in Cyprus?
- Buying real estate in Cyprus for cryptocurrency
- How to sell a property in Cyprus if there is a minor owner
- Permanent residence in Cyprus - permanent residence permit through real estate investments
- Land Registry Department in Cyprus
- Commercial real estate: where to invest in Cyprus?
- Real estate for yachtsmen in Cyprus
