Many people think that it's time to start enjoying the modern benefits of the island nation and take out a low-interest loan.
But is it that simple? Let's understand.
Loans in Cyprus provide financial organizations on the standard European model. Most banks have similar, very loyal programs and serve not only locals, but also those who make purchases from abroad.
Cypriot bankers recently stated that in recent months interest in mortgages has been steadily declining, and in the coming months the situation may become more difficult. Among the main reasons cited were: rising construction costs, rising energy prices and rising mortgage rates.
According to the Central Bank of Cyprus, at the end of November 2022, total mortgage loans amounted to €8.8 billion, compared to €8.9 billion in November 2021 and €9.5 billion in November 2019.
All of this creates a rather dim outlook, so people are in no hurry to take out new loans just yet. Also, experts note that demand is reduced by the war in Ukraine, rising inflation, rising costs of housing and food. In addition, the Cypriot government has completed the loan subsidy program, which was of great interest to locals.
In January 2023 Βank οf Cyprus announced its intention to raise rates as early as this March. Wholesale funding will be introduced into the calculation methodology. On December 15, the European Central Bank raisconstruction costsed the prime rate by 50 basis points to 2.5%. The minimum rate will now be around 2%, up from 1.8% previously. The average interest rate is 4.5%. Still, if you look back to 2007, the rate has fallen nearly 7% since then. Nevertheless, many potential buyers have firmly taken a wait-and-see attitude.
The minimum deposit has not changed. It is still 20%. The maximum can reach 50%. The final amount depends on the status of the borrower on the island. Locals are usually required to make a smaller down payment, while foreigners are required to make a larger one.
For many foreign investors, the purchase of Cypriot real estate on credit has always been considered a profitable acquisition. Buying properties with the help of a mortgage, they retain the right to resell them, as well as to increase the value, improving the characteristics.
For locals who do not have enough money available to purchase their home, a mortgage is still a great solution. Let's break down the basic steps.
Step 1: Call and visit the bank in person
Typically, bank websites have detailed information on who they are willing to lend to and on what terms. Depending on the object, status and capabilities of the buyer, the conditions may vary. After reading all the information, call the bank and arrange a personal meeting with the manager of the credit department.
Most likely, after that they will constantly call and remind you that once you were interested in a loan, even if you change your mind. Overall, it's not a big deal. But now you will understand the approximate budget of the financial operation and put in order the necessary documents.
Step 2: Choose a property and make a deposit
If you are looking for a suitable plot of land, apartment or house, you should immediately inform that you intend to buy with the help of a mortgage. This is so that the seller clearly understands that it will take some time for the loan to be approved. Sometimes the process can take a couple months.
What to do if the seller has no desire to wait? Put down a small deposit. But only if the loan is unexpectedly denied or you yourself find something more interesting, the money will forever remain with the seller.
Step 3: Gather the documents and formalize the sale
Think carefully about how long you would like to take out a loan. In Cyprus, early repayment is not practiced, and in some cases borrowers are even fined for this. Usually the loan is taken for a period of 5 to 30 years. The borrower should not be younger than 18 years old, and at the time of the end of repayment he should not be older than 65-70 years. The amount of calculated monthly installments should not exceed half of the salary.
Documents:
- Passport
- Certificates of income of the main applicant and all family members
- Copies of ownership documents for any valuable objects (real estate, cars and other).
- Certificate of no criminal record
- Certificate of the price of the purchased object from a licensed appraiser
- Life and health insurance of the borrower
- Tax returns for the last years
- Certificates on movements of funds on bank accounts
The bank representative, at his discretion, may request more or less papers. In rare cases, banks make concessions. For example, is willing to wait for the Title together with the borrower because of bureaucratic delays.
Documents for the property to be purchased can be the following:
- For secondary housing will require a certificate of ownership - the Title
- Contract of sale
- Surety bond from the builder
- Stamp duties for the contract
- Permission for a foreign person to purchase a property from the Council of Ministers
In order to be approved for a mortgage with a minimum interest rate, you will have to take insurance, according to the regulations of a particular credit organization. Accordingly, you can save money on things that are not in the requirements. Read about mortgage insurance in our previous blog. The cost of health insurance ranges from 300 euros to a thousand per year, for property insurance the price varies within a thousand euros per year.
As a reminder, until the buyer repays the loan in full, the main document of the owner Title, is kept in the bank. Thus, without the knowledge of the financial organization, the new owner has no right to arbitrarily dispose of the property. On the other hand, he can always resell it, notifying the bank in advance and obtaining the appropriate authorization.
Interested in housing in Cyprus? Check out DOM! The agency's website has the largest real estate database in the country - more than 30 thousand residential and commercial properties across the island! Here you will find information about the latest development projects. Select and contact professional brokers who will help you make the right choice!
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