It is possible to get a mortgage in Cyprus not only for EU/EEA citizens, but even for foreigners. Cyprus rates can be from 1.9% to 7.5%, so for many buyers, mortgages are an excellent option when buying a home on the island.
Basic information about mortgages in Cyprus
The scheme of mortgage lending on the island is the same as in any other country. The borrower must make an initial payment, and the bank pays the seller the rest of the money.
As a rule, the minimum down payment in Cyprus is 20% of the value of the property. This is the most loyal option, which can be given only for a rare borrower (we will talk about it below). The minimum initial payment is available to citizens of Cyprus, as well as those who purchase primary real estate.
The interest on the loan is usually 3-4%, and the term of consideration of the application is from a week to 2 months.
Cyprus banks are less willing to issue loans for secondary real estate, which is reflected in higher down payments and interest per annum. The required amount can reach 40-50%, and the interest on the loan will be 5-7%.
Approximately the same conditions will be offered to foreign borrowers.
If you are not a resident of Cyprus (more on this below), then be prepared for a down payment of 40-50% and a high rate of 6-7.5% per annum.
Foreigners who are residents of Cyprus can count on an initial payment of about 30% and a loan rate of about 3-5%.
Many borrowers are interested in the terms for which they can take out a mortgage. They can reach up to 40 years, but this situation is still rare. As a rule, mortgages are taken for a period of 5 to 25 years. At the same time, the borrower must be at least 18 years old.
One more note: at the end of the mortgage payment, the borrower should not be over 65 years old (in rare cases, banks raise the threshold to 70 years). That is, if you are 50 years old, the maximum term will be only 15 years.
By the way, Cypriot banks have programs for early repayment of mortgages, but there are few of them, and almost all of them are available only with a "floating interest". Therefore, when applying for a loan, think carefully about what period will suit you.
The amount of mortgage lending ranges from 75 thousand euros to 500 thousand euros. But the latter is possible only if the borrower is a resident of Cyprus and has contributed at least 50% of the cost of the purchased housing.
Insurance will also be mandatory, both for the life and health of the borrower and for the property being purchased.
And finally, the customer's solvency is very important for any bank issuing a loan. If the applicant shows a good and regular income, other elements of his well—being, shows reliability - the bank will more willingly and at a lower interest rate give him a mortgage.
Important: often the interest is "floating", but for the first 1-3 years it is possible to take out a mortgage with a fixed rate.
There are seven tips which should help to get a better mortgage loan.
#1: the borrower should be a resident of Cyprus
A resident is not necessarily a citizen. A resident is a person who permanently resides on the territory of the country, receives income here and conducts any activity.
Residents of Cyprus include:
- citizens of Cyprus
- citizens of the EU/EEA member country
- third-country nationals who have a residence permit in Cyprus.
Citizens of Cyprus are provided with the most loyal mortgage conditions. They can even count on government subsidies to cover part of the costs and interest.
It is also quite simple for residents to get a mortgage — it is enough for them to show a high and stable income. If a person lives and works on the territory of Cyprus, then they will pick up slightly tougher mortgage conditions. Usually it is 30-40% of the initial amount, mainly for primary real estate, and 3-5% per annum.
Non-residents can also get a mortgage loan, but for this you need to deposit about 50% of the initial amount and show extremely high incomes of the whole family plus a solid bank account. You will also need a more extensive package of documents.
#2: high stable income
How is solvency determined?
First, it is better to show the income not of an individual, but of the whole family — as a rule, this is the income of both spouses. In this case, you can take out a mortgage so that the monthly payment takes up no more than 50% of the family's income.
For example, the one spouse gets 3.5 thousand euros, and the other spouse — 1.5 thousand euros, their joint income is 5 thousand euros. This means that the bank will approve a mortgage loan with monthly payments of up to 2.5 thousand euros, but it will not approve 3 thousand euros anymore.
Second, if one person takes out a mortgage, the monthly payment should not take up more than a third of his income. For a client with a salary of 3.3 thousand euros, the bank will approve a monthly payment of no more than 1.1 thousand euros.
Sometimes the bank allows a large share, leaving a person a living wage (about 725 euros), but this happens extremely rarely and is available only to citizens of Cyprus. Also, if the borrower is alone, but he has a high income (from 5 thousand euros), then the bank can allow him to pay about half (2-2.5 thousand euros) per month.
Hint: the money received from renting housing in Cyprus is also considered income. Therefore, it is worth making it out correctly and specifying it in the documents when applying for a mortgage.
#3: income in euro
If a real estate buyer earns less, but in euro (or in another stable currency), they will be given more preference than a buyer who receives a more solid income, but in rubles.
#4: bank account with big deposits
If the borrower has a bank account (preferably in Cyprus, but it is also possible in other banks), and they have an amount equal to at least 30-40% of the value of the purchased property, then the probability of issuing a mortgage loan at a lower percentage increases.
A letter of recommendation from a bank is a good document to attach to the main list (see below).
A separate category are businessmen who have the right amount to pay for the entire purchase of housing, but do not want to spend money immediately, preferring to invest them in business. In this case, the mortgage will be approved in almost 100% of cases.
#5: immovable and movable property
High welfare of the borrower — something that will definitely increase the bank's confidence. If you have a property (whether in the EU or abroad), then it is definitely worth mentioning. Cars, yachts, a collection of antiques, and other valuables are also accepted to indicate when applying for a mortgage.
The same applies to the property of the spouse(s). The higher the welfare of the family, the lower the interest on the loan will be for it.
#6: purchase through a developer
This advantage should be emphasized with two red lines, since the developer acts as the borrower's guarantor. And this is extremely important if the purchase is made by a non-resident of Cyprus. This increases the bank's trust in them.
Important: if you are buying a property to get permanent residence in Cyprus and want to take out a mortgage, it is doubly beneficial for you.
#7: purchase of new project
This advantage follows from the previous one. It is almost impossible for foreigners to get a mortgage for the purchase of secondary housing, so the main market open to them is new buildings.
When purchasing primary real estate, you can also participate in the permanent residence program in Cyprus. To do this, you need to buy one or more residential properties in the amount of 300 thousand euros, while you need to deposit at least 200 thousand euros once. But the rest of the amount can be paid in installments: in installments or a mortgage.
Package of documents for obtaining a mortgage loan
Banks request a minimum package of documents from citizens of Cyprus. A resident and a non-resident will have a different package. If the bank is in doubt, it can request additional certificates and documents, and this will increase the time for consideration of the application.
So, what documents should be provided to a non-citizen of Cyprus:
- passport with certified copies
- completed questionnaire issued by the bank
- written application for a mortgage loan (in the form of a bank)
- income statements: these can be work contracts, information about official employment, lease agreements, etc.
- income statements of the spouse(s)
- information about the movements of funds in all bank accounts for the last 3 years
- copies of documents of ownership of real estate, cars and other valuables owned by the applicant – as proof of solvency
- certificate of no criminal record
- life and health insurance of the applicant (optional, but very desirable)
- all tax returns for the last 3 years — can be both for individuals, and for sole proprietors, and for legal entities
- copies of the constituent documents – if the applicant is the owner of the company
- documents and/or copies thereof for the purchased property: title of ownership (for secondary use), contract of sale, guarantee from the developer, stamp duties, permission to purchase real estate to a foreign person, etc.
- valuation of the purchased property from a licensed appraiser
- a letter of recommendation from the banks where the applicant's accounts are available — translated and certified.
Additional expenses for mortgage lending
Speaking of expenses. If we talk specifically about the mortgage, then the largest "contribution" is the payment of 1% of the total mortgage amount. For example, you buy a property for 300 thousand euros, while paying 150 thousand as a down payment. So, you need to pay 1% of the remaining 150 thousand, that is 1500 euros.
It is also necessary to spend money on the services of a licensed appraiser – their conclusion costs about 250-600 euros.
Do not forget about life and health insurance: it will cost 600-1,2 thousand euros per year. It is also recommended to insure the purchased property, it will require 1-2 thousand euros per year.
A separate article should count the services of a lawyer. For example, at the DOM real estate agency, a specialist fully accompanies the transaction, including helping to arrange a mortgage at the lowest possible rate.
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.
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