What benefits for the borrower
In Cyprus, foreign citizens as well as locals have the opportunity to get a mortgage. Cypriot banks offer low interest rates, ranging from 1.9% to 7.5%, which makes a mortgage an attractive option for many who are planning to buy a home on the island.
Key facts about mortgages in Cyprus
The mortgage lending process in Cyprus is not unlike that used in many other countries. The borrower must make a down payment, and the bank pays the remaining amount to the seller. Typically, the minimum down payment in Cyprus is 20% of the value of the property. This option is the most advantageous and offers the borrower a number of advantages. The minimum down payment is available to citizens of Cyprus, as well as those purchasing a new property. The interest rate on the loan is usually 3-4%, and the application process takes from one week to two months. For the purchase of secondary real estate, banks in Cyprus are more cautious in lending. This is reflected in the higher requirements for the down payment and interest rate. The required amount of down payment can be as high as 40-50%, and the interest rate on the loan is 5-7%.
Foreign borrowers are offered approximately the same conditions for obtaining a mortgage in Cyprus.
If you are not a Cypriot resident, you will need to make a down payment of 40-50% and face a higher interest rate of around 6-7.5% per annum.Cypriot residents who are foreigners can expect a down payment of about 30% and a lower loan rate of about 3-5%.Mortgages can last up to 40 years, but this is rare. Typically, mortgages are issued for a period of 5 to 25 years, provided that the borrower is 18 years old.There is also a limit on the age of the borrower: at the end of the mortgage, the borrower must not exceed 65 years (in rare cases, banks may increase the age limit to 70 years). For example, if you are 50 years old, the maximum term of the mortgage is 15 years.Cypriot banks offer programs of early repayment of mortgages, but they are available only with a variable interest rate. So before taking out a loan it is important to consider what term you are happy with.The amount of a mortgage loan varies from 75,000 euros to 500,000 euros. However, the latter amount is only possible for residents of Cyprus, who have paid at least 50% of the cost of purchased housing.Mandatory requirement is a life and health insurance of the borrower, as well as the property.The key factor for the bank granting a mortgage loan is the solvency of the client. If the applicant can demonstrate a stable and regular income, as well as reliability and well-being, the bank will be willing to give him a mortgage with a lower interest rate
Some points of advantage for borrowers
1. Borrower is a resident of Cyprus
A resident in Cyprus is not necessarily a citizen of the country, but any person who permanently resides in Cyprus, receives income and is engaged in any activity here.
Residents of Cyprus are considered to be: :
- Citizens of Cyprus.
- Citizens of any EU country.
- Citizens of third countries who have a residence permit or a permanent residence permit in Cyprus.
Cypriot citizens with a Cypriot passport receive the most favorable conditions in obtaining a mortgage. They can even count on government subsidies, which cover part of the costs and interest.For residents to get a mortgage is easy enough – they only need to demonstrate a stable high income. If a person lives and works in Cyprus, he will be offered a little more stringent conditions. Typically, a down payment of 30-40% and an interest rate of 3% to 5% per annum, mainly for primary properties.Non-residents may also be able to obtain a mortgage loan, but they will need to make about 50% of the down payment and will need to demonstrate a high family income and have substantial funds in the bank account. In addition, they will need to provide a more extensive set of documents.
2. High stable income
One of the main criteria for determining the solvency of the borrower is his income. Banks in Cyprus evaluate the combined income of the whole family if the borrower is married, and the income of the borrower himself if he is alone. Often not only the current income is considered, but also its stability over a period of time.
When the borrower is married, banks usually recommend that the monthly mortgage payment not exceed 50% of the total family income. For single borrowers, it is recommended that the payment be no more than one-third of their income. However, the bank may consider other options depending on the situation, such as leaving the borrower a living wage. The borrower’s high income may increase their ability to pay and allow them to handle a higher monthly payment. In that case, the bank may allow up to half of the borrower’s income to be paid. It is important to note that these guidelines and restrictions may vary slightly depending on the bank and the individual circumstances of each borrower. The ability to pay is assessed individually for each applicant based on the income and financial information provided..
3. Income in euros
An important advantage in obtaining a mortgage in Cyprus is the borrower’s income expressed in euros, the main currency in which banks in Cyprus usually provide loans. If the borrower has income in euros, even if it is lower in amount than income in other currencies, he is given more attention from banks. At the same time, if the borrower has a higher income, but in another currency, such as rubles or dollars, his application may be considered less attractive. Although in rare cases, banks in Cyprus can provide a mortgage in dollars, preference is still given to borrowers with income expressed in euros. Therefore, it is recommended that applicants show their income in euros in order to increase their chances of obtaining a mortgage credit.
4. having a large amount in a bank account
If a potential borrower has a bank account, preferably in Cyprus, but also possibly in other banks, and this account has an amount not less than 30-40% of the cost of housing to be purchased, it significantly increases the likelihood of obtaining a mortgage loan at a lower interest rate. A separate category is businessmen who have enough money to fully pay for the property, but they prefer to keep these funds and invest them in their business. In this case, the mortgage loan will be approved almost 100% of the time.
5. Purchase through a real estate developer
Buying a property through a developer is a significant advantage that should be emphasized. In this case, the developer acts as guarantor of the borrower, which is especially important for non-residents of Cyprus. Because of this, the bank shows greater confidence in the borrower and is willing to lend him more willingly. Developer-seller seeks to make the purchase process as convenient as possible for its customers. Therefore, he cooperates with Cypriot banks, sometimes even with several. For clients of large developers there are special programs and credit terms, which make it easier to get a mortgage.
6. Availability of other immovable and movable property
The bank’s confidence enhances your high wealth. If the borrower has real estate, regardless of its location (in the EU or abroad), it should be specified. It is also customary to report cars, yachts, antique collections, and other valuables when applying for mortgage documents. The same goes for assets held by a spouse. The higher the family’s wealth, the lower the interest rate on the mortgage loan will be offered to them.
7. Buying Primary Real Estate
Obtaining a mortgage on the purchase of secondary housing in Cyprus is almost impossible, so the main market available to them – are new buildings. When buying a primary residence, it is also possible to take part in the program of simplified receipt of permanent residence (Permanent Residence) in Cyprus. To do this you need to buy one or more residential property for an amount not less than 300 thousand euros, subject to the payment of a lump sum of at least 200 thousand euros. The remaining amount can be paid in installments or through a mortgage loan.
Package of documents for a mortgage loan
Banks in Cyprus require a minimum package of documents from Cypriot citizens. For residents and non-residents the package of documents will be different. In case of doubt, the bank may ask for additional certificates and documents, which, in turn, may increase the application processing time.
Documents to be provided to a non-citizen of Cyprus :
- passport, additionally – internal passport, with certified copies
- a filled out questionnaire, which is issued by the bank
- Written application for a mortgage loan (in the bank’s form)
- Income certificates: these can be work contracts, information about official employment, rental contracts, etc.
- Earnings statements from your spouse
- statements of cash flows in all bank accounts for the past 3 years
- copies of property documents for real estate, automobiles, and other valuables owned by the applicant as proof of financial solvency
- criminal record certificate
- Applicant’s life and health insurance (optional, but highly recommended)
- all tax returns for the last 3 years – can be for a natural person, or for an individual entrepreneur, or for a legal entity
- Photocopies of founding documents – if you are an owner of the company
- Documents and/or copies of the purchased real estate: title deed (for secondary ownership), contract of sale, surety from the developer, stamp duty, permission to purchase real estate for a foreign person, etc.
- Valuation of the property from a licensed appraiser
- Reference letter from banks where the applicant has accounts – translated and certified.