Mortgage vs. rent: which is more profitable in Cyprus?

Аренда или ипотека: что выгоднее на Кипре?
30 November 2020 Liza Medvetskaya
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Sooner or later, every resident of Cyprus has a choice: to rent a house or take out a real estate mortgage.

The second option often turns out to be much more profitable, because the amount of the monthly payment on the loan is comparable to the amount of the rent, and sometimes even lower.

If today the average rent for an apartment of 100 m2 varies from €650 to €800 depending on the area and city of the island, then the loan payment when buying an apartment can be the same level.

In addition, the government of Cyprus recently launched a mortgage subsidy scheme. In a short time, it gained unprecedented popularity, especially among young people. And this is not surprising, since the conditions for borrowers are very attractive.

By the way, banks usually issue loans to clients in the amount of 75 to 80% of the value of the acquired real estate.

For example, if the house costs €150,000, with an interest rate of 2.20%, an initial payment of 35% and a loan term of 240 months (20 years), the monthly payment will be €773.19, and the total overpayment is €35,540.70.

At the same time, if we take into account the housing interest rate subsidy promoted by the Ministry of Finance, then the above data will become much more attractive to the borrower. In particular, for an amount of €150,000 for the first four years, the interest rate will be charged at 0.7%, and then 2.20%. If an initial payment of 35%, loan term is 240 months (20 months), the monthly payment will be €669.97 for the first four years, followed by €52.27. The total amount of the overpayment will be reduced by €8,962.

For a €150,000 mortgage with an interest rate of 2.20%, with an initial payment of 35% and a repayment period of 300 months (25 years), the monthly payment is €650.57 and the total overpayment is €45,136.

For the same mortgage loan, when using a government subsidy, during the first four years, the interest rate will be charged at 0.7%, and then 2.20%. The monthly payment will be €545.19 for the first four years, and then €633.41. The total amount of the overpayment will be reduced by €9,369.

As you may know the mortgage subsidy program was launched in Cyprus at the end of June 2020.

It is attended by a number of large financial institutions of the island, including Ancoria Bank, Astrobank, Hellenic Bank, CDB Bank, Bank of Cyprus, RCB Bank, Alpha Bank Cyprus, National Bank of Greece, Eurobank Cyprus, as well as the state Housing Subsidy Organization. (Housing Finance Corporation).

The subsidy covers mortgage loans taken from March 1, 2020 from a credit institution that participates in the program, as well as loans for the purchase or construction of basic housing. An obstacle to participation in the scheme is participation in other government programs to subsidize interest on loans. The size of the mortgage loan cannot exceed € 300,000. The maximum subsidy rate is 1.5% per annum, the duration of the subsidy is four years. According to the terms of the program, the interest margin for lenders should not exceed 2.30%.

Аренда или ипотека: что выгоднее на Кипре?

Home purchase prices by city of Cyprus

Based on the data of various real estate websites, we can conclude that in Nicosia you can easily find spacious apartments for purchase, ranging from 86 to 154 m2, in a price range from €140,000 to €216,000. Renting apartments in the capital ranges from €800 to €1700 per month.

In Limassol, the picture is somewhat different, as market prices are much higher here than in Nicosia. Moreover, both for rental apartments and real estate purchase. The average cost of an apartment for purchase in Limassol starts from €200,000. In other words, if you take out a loan of €250,000, with an average interest rate of 2.20% for 20 years, the monthly payment will be €1288, if for 30 years - it is €950. By the way, the cost of an apartment with an area of ​​92 m2 in a new building in the center will cost about €265,000, and a resale with an area of ​​120 m2 - €230,000. At the same time, rental housing in Limassol is also one of the most expensive on the island. An apartment with an area of ​​55 to 145 m2, depending on the area of ​​Limassol, costs about €750 - €1300 per month.

In Paphos, the cost of renting a one-bedroom apartment ranges from €350 to €500, with two bedroom apartments are for €450 to €600 and three bedroom ones are €500 to €700. The cost of renting a house with 3 bedrooms ranges from €650 to €800, and 4 bedrooms are from € 750, but can exceed € 1000.

In Larnaca, rents are lower than in other cities in Cyprus. For €450 you can find a one-bedroom apartment in the central areas and for €600 in the tourist areas. House rental prices range from €550 to €1,500.

Source: philenews.com
Photos: pixabay.com
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