Mortgage in Cyprus. How to get a loan for the purchase of Cypriot real estate

Buying property abroad requires significant financial investments, and tools such as loans and mortgages make it possible to immediately get the desired property. However, not all countries actively provide mortgages to foreigners, fearing possible risks.

In the case of Cyprus, local banks are more willing to provide mortgage loans to foreigners, but the amount of the initial payment will be higher than for the citizens of the island. The percentage of required investments can reach half of the value of the purchased property.

In our article, we will focus on what a mortgage in Cyprus is, what documents will be required for it, and how much it will cost.

Features of mortgages in Cyprus

Foreign citizens who are not EU residents must obtain a special permit from the Council of Ministers of Cyprus to purchase real estate. This requirement applies to all buyers from countries outside the EU, regardless of whether the property is purchased for personal use or for investment purposes. However, this process is most often a formality: refusals are rare and only in cases where the buyer has problems with the law. To obtain a permit to purchase real estate, foreign citizens need:

• Application form (COMM 145 form).
• A copy of the passport.
• Financial documents confirming income.
• A real estate plan (if a plot is being purchased, a copy of the building permit).
• Certificates of absence of debts and tax obligations.

The process of buying a property can be completed even before obtaining permission from the Council of Ministers of Cyprus. Banks can take out mortgages, provided that permission is obtained at the next stages of the transaction.

Who can get a mortgage in Cyprus

Mortgages in Cyprus are available to a wide range of borrowers, including both local citizens and foreign residents. To successfully obtain a loan, you need to have a stable income and a transparent financial history. The main candidates for a mortgage are:

• Citizens of Cyprus. As residents, they have access to more lenient mortgage terms, with a minimum down payment of 10% of the property value and a simplified approval procedure.
• Foreign citizens. For non-residents, the requirements are somewhat stricter. Banks require foreigners to cover 20-50% of the initial cost of real estate. For citizens of non-EU countries, some banks may request confirmation of a Cyprus residence permit. 
• Legal entities. Local banks provide mortgage loans to companies registered on the island to purchase commercial real estate or housing for their employees.

Banks in Cyprus may refuse a mortgage if:

• The borrower has a low income level, which does not allow him to cover monthly payments.
• There are overdue or problem loans in other countries.
• The borrower cannot provide sufficient evidence of the sources of his income.
• The desired property does not meet the requirements of the bank (for example, it is in poor condition or has unfinished legal issues).

Mortgage in Cyprus for Russians

Despite international sanctions, Russian citizens do not face significant restrictions when purchasing real estate in Cyprus. Although the verification of documents by a bank or agency may take a long time, in general, the procedure follows a standard scenario.

A mortgage in Cyprus for Russians is usually issued for a period of 5 to 25 years. The main requirements for obtaining a mortgage are a stable income, documentary proof of solvency and the availability of the necessary package of documents, including confirmation of the legal origin of funds.

It is important to note that the process of obtaining a mortgage for Russian buyers wishing to purchase real estate in Cyprus is accompanied by legal support and advice. If small agencies and specific specialists can refuse to serve Russian citizens, then this is practically not found in large banks.

Advantages of a mortgage in Cyprus

A mortgage in Cyprus has a number of advantages, the main one of which is the ability to fix the interest rate for a long period. This is especially beneficial in conditions of instability of the global financial market, because it protects borrowers from possible fluctuations in rates in the future.

Other benefits include:

• Flexibility of credit conditions. Banks in Cyprus offer various loan terms: from 10 to 40 years. This allows you to reduce monthly payments, which, according to the legislation of Cyprus, cannot exceed 30% of monthly income.
• Buying a property in a stable jurisdiction. Unlike the global one, the Cypriot real estate market is quite stable, especially in tourist-attractive areas. Investing in real estate using a mortgage allows you to save capital and make a long-term profit, especially if the property is used for renting.
• A simple procedure for obtaining a residence permit. Buying a property in Cyprus with a mortgage can also serve as a basis for obtaining a residence permit.

The main disadvantages include:

• The need for a higher down payment (up to 50%).
• A lengthy mortgage approval process for foreign citizens, associated with the need to verify documents and legal aspects.

There are also certain risks if the buyer receives income in a currency other than the euro. In case of a significant change in the price of the currency relative to the euro and an increased risk of mortgage debt, you should immediately contact the bank. The institution may choose to restructure the debt, which means revising the payment schedule, extending the loan term or temporarily reducing the amount of payments. In individual cases, the bank may provide temporary tax holidays for payments.

It is necessary to contact the bank before the formation of debt, because if there is already one, the bank can begin the procedure of rejecting the funds and property of the borrower, which are located in the jurisdiction of Cyprus.

How to buy a property in Cyprus

What kind of property in Cyprus can I buy with a mortgage

There are no restrictions on the purchase of real estate in Cyprus. Even real estate with the status of a historically significant object can be bought or sold, but with its own nuances. 

However, there are some restrictions when buying real estate by foreigners. According to official sources, foreign buyers from countries outside the EU can purchase no more than two different types of real estate (for example, one house and one commercial object), and the total area of these objects should not exceed 4000 sq.m.

When buying primary real estate that has not yet been exploited (new buildings), Cyprus gives residents benefits, such as a reduction in the VAT rate (5% for the first 130 sq.m instead of 19%). While a mortgage on a secondary home may be accompanied by additional costs, such as a tax on the transfer of property rights.

The primary and secondary nature of real estate also affects the value of mortgage rates. You can buy an apartment in Cyprus with a mortgage at a rate of 1.91% for new buildings and up to 4.28% for secondary facilities. For commercial real estate, rates start from 3.98% to 5%, and the minimum down payment requirements are often higher (usually 20-40% of the cost). 

Documents for mortgage registration and requirements for the applicant

As in other countries, you can take out a mortgage in Cyprus if certain conditions are met. In addition to the standard age range from 18 to 65 years, in Cyprus there is a requirement for a maximum age at the time of completion of the mortgage — 65 years. That is, if the applicant is 40 years old, then he will not be provided with a mortgage for a period of more than 25 years. 

Additional requirements for the applicant:

• Initial payment. Banks usually require a minimum down payment of 20-40% of the property value. For non-residents, especially foreign citizens from non-EU countries, this deposit will be higher and will range from 30% to 50%.
• Creditworthiness. The bank checks the applicant’s ability to repay the loan in Cyprus on a regular basis — monthly payments should not exceed 30-33% of his income. This condition is mandatory only for obtaining a mortgage — if this threshold is exceeded in the process of paying it, but the client does not create debts to the bank, there will be no complaints from the department.
• Insurance. Most banks require life insurance for the borrower and real estate insurance (for example, against fires or natural disasters). The amounts of annual insurance premiums vary and depend on the loan balance and the value of the property.

The main documents for registration of a mortgage:

• A copy of the applicant’s valid passport.
• A completed application form provided by the bank.
• Confirmation of income by means of a certificate from the place of work, a tax return, bank statements, as well as documents confirming additional sources of income.
• Documents on previous loans (if any), as well as a certificate of absence of debts.
• A copy of the preliminary or final agreement with the seller of the property.
• The report of an independent appraiser on the market value of the property.
• A building plan, cadastral information, as well as confirmation that the property is not under bail or arrest.

The process of obtaining a mortgage in Cyprus

Before applying, you need to assess your financial capabilities, since banks in Cyprus usually require that monthly mortgage payments do not exceed 30-35% of the applicant’s total income. The buyer chooses a property, whether it is an apartment, a house or a plot, and checks the legal purity of the object (for example, he can request data in the cadastral register).

1. Applying for a mortgage in one of the Cypriot banks. To do this, you must provide a set of documents, including a passport, proof of income, credit history and property valuation. Non-residents must open an account in Cyprus.
2. The bank’s assessment of the applicant and the property. The Bank checks the documents, including the applicant’s credit history, income and other obligations, and also checks whether the property corresponds to the estimated value.
3. Mortgage approval and signing of the contract. At this stage, the final loan amount and its terms, including the interest rate and mortgage term, are agreed upon. After the loan is approved, the buyer and the bank sign a loan agreement, which sets out all the conditions.
4. Mortgage registration and purchase of real estate. After signing the contract, it is necessary to register the mortgage and real estate in the Department of Land Resources of Cyprus. This step confirms the legality of the transaction and protects the rights of both the bank and the borrower. As a rule, after registration of the mortgage, the balance of funds is transferred to the seller and the transaction is considered completed.

In most cases, the bank requires insurance of the purchased real estate against risks (fire, natural disasters), as well as life insurance of the borrower, in order to protect their interests in case of unforeseen circumstances.

Registration of documents through an agency

The process of obtaining a mortgage and purchasing real estate is simplified if the buyer uses the services of an agency. It takes on most of the bureaucratic and legal tasks, but not for free. The legal aspects in Cyprus are especially difficult if the buyer does not speak the local language, because some official legal acts and laws have not been translated into any languages other than Greek. 

The Agency’s activities include:

• Legal verification of the object. The purity of ownership rights, the absence of debts or encumbrances on the object, as well as confirmation of the seller’s right to dispose of real estate are checked.
• Interaction with the bank. Large agencies most often already have experience of interacting with local banks and are privy to the bureaucratic nuances of the island. In some cases, they help in the preparation of all necessary documents for the bank, including the preparation of applications, collection of certificates and confirmations. Banks themselves are more willing to work with agencies, because they trust their assessment of the buyer.
• Valuation of real estate. The agency takes over the valuation of real estate, cooperating with trusted appraisers. 

Working with an agency almost always requires payment of a commission, which ranges from 2% to 5% of the real estate value. The cost of the services of individual specialists with whom the agency works to resolve customer issues is often not included in the commission and is paid separately. Agencies can also offer additional paid services, such as transaction support at all stages, assistance in obtaining a residence permit or other permits.

TOP cities in Cyprus for real estate investments

Opening a bank account 

To take out a loan in Cyprus and legally conduct financial transactions on the island, non-residents need to open a bank account with one of the local banks. There are several large banks operating in Cyprus, such as Bank of Cyprus, Hellenic Bank, Eurobank, which offer specialized mortgage products for foreign citizens and expats.

To open an account, non-residents (both individuals and companies) are required to provide the following documents:

• Passport.
• Proof of residence address. A utility bill or a bank statement confirming the current address, which must be no older than 3-6 months.
• Financial confirmation. Documents confirming the source of income (for example, tax returns, income statement, bank statement).
• Completed application form. Standard questionnaires for opening an account, indicating personal information and the purpose of opening an account.

After submitting the documents, the bank will check the client for compliance with the anti-money laundering (AML) requirements and the “know your customer” (KYC) procedure. The process usually takes from a few days to a couple of weeks. After approval, the bank will open an account and provide the customer with access to Internet banking, debit card and other services.

You can open an account in Cyprus remotely through intermediaries or directly through a bank. However, not all banks provide the opportunity for direct treatment, preferring to act with intermediaries. In this case, it is best to use the help of local legal or financial specialists. After signing the contract, they will interact with the bank on behalf of the client and be responsible for compliance with legal requirements.

It is also easy for a non-resident to open an account in Cyprus, but it should be borne in mind that some Cypriot banks may require them to maintain a minimum account balance, especially if it is a corporate account. 

Expenses when applying for a mortgage 

When applying for a mortgage in Cyprus, it is important to take into account not only the amount of the initial payment and interest rates, but also all related costs. They include a commission to the bank or agency when applying for a mortgage, as well as taxes and fees when buying real estate. 

These include VAT, stamp duty and title fees. The most significant of them is VAT, which is 19% of the value of the property. However, there are ways to circumvent them, and quite legal ones. We have analyzed these nuances in detail in an article about property taxes in Cyprus, which will help you better navigate the Cyprus tax field when working with real estate. For example, residents have the opportunity to receive preferential (5%) VAT and not pay some fees at all.

In the case of a mortgage, the fees do not reach such significant values as when buying real estate. The most expensive item of expenditure is the commission to the bank for granting a loan. It usually amounts to about 1% of the loan amount. For example, with a mortgage of €200,000, the commission is €2000.

Other expenses include:

• Real estate valuation. Banks require an independent assessment to determine the value of the facility, which is often paid by the borrower. The cost of the assessment varies between €100-350.
• Insurance. The cost of compulsory insurance of an object (for example, against fire and earthquakes) ranges from €350 to €1200, depending on the object and the bank.
• Life insurance of the borrower. It is required to protect the bank in case of unforeseen situations. The cost is approximately €150-600 per year, and this amount decreases as the debt decreases.
• Notary services. A notary is an important figure in real estate transactions in Cyprus, as he checks the legal purity of the transaction and prepares documents. Notary services will cost an average of €1,000 to €3,000, depending on the complexity of the transaction.
• Real estate agency services. The agency’s commission usually ranges from 2% to 5% of the cost of the object. This percentage is paid by the agency’s client, who are most often real estate sellers, but in some cases the payment may fall on the buyer’s shoulders.

The additional cost of Due Diligence, that is, checking the legal purity of the object before purchase, is € 100-350, and the cost of paperwork is about €50-150.

Cyprus banks that issue real estate loans

The main banks in Cyprus that offer mortgage loans are Bank of Cyprus, Hellenic Bank, Alpha Bank, Eurobank and Ancoria Bank. These are the largest financial institutions providing mortgage loans on the island. 

Before reviewing the terms, it is extremely important to understand that the maximum loan amount is issued by the bank based on the estimated value. That is, if the seller offers to buy an apartment, you should find out about the estimated value of this object before buying. If it is lower than the stated amount, then the maximum loan amount will be less. For example, if the apartment costs €200,000 and its estimated value is €120,000, then instead of €160,000 loan, the bank will offer only €84,000.

The main conditions offered by banks for September 2024:

These banks also provide consumer loans, not only for the purchase of cars or household appliances, but also for the purchase of real estate. This is a more flexible type of loan, because it can be taken for a shorter period than with a mortgage (usually from 1 to 7 years). However, there are disadvantages: the main one is the unsecurity of such a loan with collateral in the form of housing, as with a mortgage, which is why interest rates on consumer loans are usually 3-8% higher. 

Author

Mikhail Konon is a copywriter

I write informative articles about real estate, investments, job search and taxes.

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