How has the COVID-19 pandemic changed the mortgage lending market in Cyprus?

Loans for purchasing real estate in Cyprus: the impact of the COVID-19 pandemic on the mortgage market

The beginning of 2020 was a critical moment for mortgage lending, as the volume of issued mortgage loans decreased by an unprecedented 17% compared to the same period the previous year. However, in the second half of that year, there was a rise in interest in purchasing real estate, despite the worsening lending conditions due to risks associated with the coronavirus infection.

One important factor contributing to the resurgence of interest in mortgage loans has been thestate subsidy programlaunched in May 2020, which allowed for a reduction in mortgage interest rates. This subsidy is set to last for four years and can cover up to 1.5% of the interest rate for loans not exceeding €300,000.

Deferred desire of borrowers

An additional reason for the increase in lending volume was the postponed desire of potential borrowers, who delayed their decision to purchase housing while waiting for the end of the lockdown. The mentioned program was in effect for loans issued between March 1 and December 31, 2020.

As a result of significant demand from the public, the government decided to extend the program until the end of 2021 and increased the financing limit to €400 thousand. More detailed information on the government subsidy can be found on the websites of key banks such as Bank of Cyprus and Hellenic Bank.

Results of 2020

By the end of 2020, the total volume of mortgage lending amounted to €941 million, which is just a slight loss of 3% compared to €972 million the previous year. According to data from the Bank of Cyprus, the trend of declining mortgages in 2020 was reflected in the overall statistics.

Regional reports show thatmortgage loan interest ratesin Cyprus have fallen from a record high of 6.65% in 2013 to a low of 1.65% in April 2021. Changes in mortgage interest rates have been recorded on a regular basis and this trend continues.

Mortgage lending for foreign citizens

Regarding mortgage lending for foreign citizens in Cyprus, three major banks are actively operating:

• Bank of Cyprus
• Hellenic Bank
• Alpha Bank

For banks, working with foreigners presents an increased risk, as it is often difficult to assess the creditworthiness of a non-resident and their financial indicators. As a result, banks impose stricter conditions for foreign clients.

Requirements for the down payment

For example, while residents of Cyprus only need a down payment of 20% of the property value, foreign buyers are required to pay at least 40% of that amount.

The difference is also evident in the interest rates: for citizens of Cyprus or permanent residents, the rate usually ranges from 2.0% to 2.5% per year, while foreign clients are typically offered a rate between 4.0% and 4.5%.

Financial position of borrowers

The financial situation of borrowers is crucial in the mortgage approval process. Banks significantly increase the level of scrutiny on their clients, which reduces the likelihood of default. As a result, they strive to thoroughly analyze the financial condition of borrowers, and this has a serious impact on the number of loans issued.

Requirements for borrowers who are married

If the borrower is legally married, they must list their spouse as a guarantor for the loan and provide documents confirming their financial stability. This requirement serves as one of the precautionary measures implemented by banks and other financial institutions.

It is also important to familiarize yourself with the options for obtaining a mortgage abroad for foreign citizens, as well as to explore the conditions for investments and immigration while keeping an eye on the news.

Age limits for borrowers

As for the requirements of credit institutions for borrowers from other countries, they only accept applications from clients who are at least eighteen years old. However, the maximum age of the borrower at the time of loan repayment completion should not exceed 65 years.

Anyone involved in mortgage lending should also consider the mandatory life insurance for the borrower, corresponding to the terms of the loan agreement.

Financial burden and solvency

When evaluating a loan application, banks take into account the financial burden placed on the borrower. It is important to consider the following points:

• The ratio of the borrower's income to expenses.
• The maximum share of the monthly payment should not exceed one third of the total family income.

The borrower needs to convince the bank that repaying the loan will not worsen their financial situation; otherwise, the risks of insolvency will significantly increase.

Sources of income for the borrower

What else do banks pay attention to when accepting mortgage applications? The first thing to consider is the source of income of the potential borrower:

• If the income is generated exclusively in rubles and mainly from salary, the chances of approval may be low.
• However, having income in euros or British pounds increases the chances of getting a loan.

The key point is the transparency and legality of the funding sources, so the client will need to provide bank statements and other supporting documents.

Financial preparation for obtaining a loan

For example, if a client has an income of €2.5-3.0 thousand per month and plans to take out a loan to buy an apartment worth €150 thousand, they will need to make at least 50% of their own funds as a down payment. This emphasizes the importance of financial preparation.

Real estate appraisal

As for the banks' requirements for real estate, a mandatory procedure is the assessment of each specific object in order to establish the amount of credit that the bank is ready to provide. Additionally, it is engaged in analyzing the liquidity of the object:

• Real estate can be found in both the primary and secondary markets.
• However, lending is most often related to new constructions.

The size of a mortgage loan for secondary market properties usually does not exceed 50% of the appraised value. Therefore, it is important for buyers in the secondary market to ensure that the seller has a valid title to the property; otherwise, obtaining a loan will be impossible.

In this article we explore a variety of residential properties on offer in Cyprus that may be of interest to future owners. For example, there is an apartment in Ayia Napa, the price of which is 269 000 euros. The area of this dwelling reaches 84 square meters, it has three cozy bedrooms and two modern bathrooms. This creates a unique opportunity to make a transaction remotely. The project is located in the famous resort area of Kapparis, renowned for its high quality and many features. This hub area is perfect for both active vacations and endless time spent on the magnificent sandy beaches thanks to the crystal clear sea.

Interesting real estate offers

There is also an interesting apartment in Ayia Napa, priced at 213,000 euros. It covers an area of 99 square meters and, like the previous one, includes three bedrooms and two bathrooms. This property offers an atmosphere of complete relaxation and plenty of sunlight, which is essential for comfortable living. The stylish modern design and high level of privacy make this project quite appealing. The town of Paralimni, located on the eastern coast, adds additional advantages to this location.

Luxury real estate

If you are interested in elite real estate, you should pay attention to a villa in Ayia Napa, priced at 450,000 euros. The area of this property is 105 square meters, and it includes four bedrooms and three bathrooms. This unique opportunity to acquire coastal housing is located just a few steps from the picturesque Potamos harbor and 400 meters from the sea. The complex that houses this villa also includes bungalows with stunning sea views. Don't forget about your comfort: there is a spacious garden and verandas on the premises.

Other options

Another interesting option is a villa for 550,000 euros, with an area of 131 square meters and three bedrooms. This villa features a private pool and a well-maintained garden, located just a hundred meters from the sea. The property is fully furnished and offers the possibility of obtaining a residence permit upon purchase. This means you can enjoy life in sunny Cyprus and handle all legal matters through SWM Consulting.

Apartments and houses for sale

• Moreover, there is an opportunity to purchase an apartment in Ayia Napa for 1,400,000 euros. This 157 square meter space includes two bedrooms and two bathrooms.

• They are part of a residential complex featuring 220 luxurious apartments located in two stylish towers, along with 35 villas with sea views.

• Owners have access to a private island that is exclusively for them.

Investment opportunities in Cyprus

The government of Cyprus actively supports investors, providing them with reliable guarantees when investing funds. Consider one of the attractive options - an apartment in Ayia Napa with a price tag of 2,076,800 euros, an area of 203 square meters, covering three spacious bedrooms and two bathrooms. When purchasing this property, the investor receives temporary resident status.

This elegant penthouse apartment also features a 29 square meter terrace and is located in an elite complex in Ayia Napa, where apartments of various layouts are offered — from one-bedroom to two-bedroom. All residents have access to a communal pool, well-maintained gardens, and covered parking. The construction and finishing used...materials of the highest qualitythat guarantees durability and comfort of living.

Houses from Mercury Group

Mercury Group offers a house in Ayia Napa for 659,656 euros, with a total area of 191 square meters and three bedrooms. By purchasing this property, the future owners are immersed in an atmosphere of peace and tranquility. The complex will be located at a height of 104 meters, which will open up magnificent views of Ayia Napa.

A total of 43 modern cottages with private pools are planned to be built here, meeting the latest comfort standards. The convenient location and carefully thought-out design make these villas very appealing to buyers.

Exclusive villas

Mercury Group also offers a house in Ayia Napa, with an area of 244 square meters and a price of 3,350,000 euros, which will feature three bedrooms and three bathrooms. A total of 12 magnificent villas with three bedrooms are planned to be built on well-maintained and secured grounds of the peninsula, where panoramic views of the marina and yacht dock are available.

The architectural style of these villas is a modern interpretation of the local southern aesthetic, possessing the charm characteristic of the region, which is evidenced by the use of natural stone in the finishing.

Unique offers on the market

Among the more high-end offerings, there is a house in Ayia Napa priced at 5,100,000 euros, with a total area of 429 square meters, which includes three bedrooms and three bathrooms. This project features 12 luxurious villas on an artificial island with a direct view of the waterfront.

Residents have the option to choose villas with any number of bedrooms — from three to five, featuring private docks and access to exclusive piers. This impeccable location boasts spacious living areas and open pools, creating a sense of an endless horizon.

Another villa worth mentioning is priced at 5,100,000 euros and has an area of 433 square meters. This magnificent property is part of 11 exclusive villas surrounding a picturesque beach with soft sand. Each villa is built with the finest materials available on the market and is equipped with high-quality fixtures and plumbing.

• Interior aestheticswith large floor-to-ceiling windows creates a feeling of openness and light.
• Architectural solutionsharmoniously combine modern and retro styles.

Comfortable apartments in Ayia Napa

Don't miss the chance to pay attention to an apartment in Ayia Napa, priced at €1,800,000. It is a two bedroom apartment on the 24th floor of East Tower - part of the ambitious Ayia Napa Marina project, where the buildings have a unique T-shaped plan.

This offer is perfect for those who value comfort and style in one of the most picturesque places in Cyprus.

Features of the building

Each level of this magnificent building has a tilt of about 1.6 degrees to the east from the West-East axis, providing residents with mesmerizing views of the Mediterranean Sea and the yacht marina. This offer suggests the purchase of an apartment in Ayia Napa, Cyprus, from Mercury Group for a price of €1,460,000. This spacious two-bedroom apartment is located on the seventh floor of the eastern tower of one of the most famous yacht complexes – Ayia Napa Marina.

The architectural design of the structure is in a "T" shape, which lends to its unique aesthetics. The unique slope of each level makes access to extraordinary horizons possible.

Second housing option

Moreover, our catalog features another wonderful housing option in Ayia Napa, where you can become the owner of a stylish bungalow. This charming living space offers three bedrooms and is priced at €425,000. It is located just a few minutes away from the beach area.

This unique property, located in Ayia Thekla, offers the opportunity to enjoy the tranquil atmosphere of living on the picturesque coast of Cyprus. The bungalow impresses with its exquisite design, private pool and all the necessary amenities for a comfortable vacation by the sea, making it an ideal choice for those who appreciate coziness and quietness.

The process of acquiring real estate

When choosing real estate in Cyprus, it is crucial to understand the key stages of the purchasing process. One of these stages is gathering the necessary documents to obtain a mortgage loan. Typically, financial institutions require borrowers to provide the following set of documents:

• A foreign passport and its copy
• Loan application
• Filled out questionnaire
• A certificate from the workplace indicating the position and income amount.
• Additional documents confirming the financial position of the borrower

Among other things, records proving no criminal record are important, as well as a bank statement showing the movement of funds in the account over the past two to three years. It will also be necessary to provide:

• Sales Agreement
• Copies of all payment documents, if available
• Insurance policy (if available)
• Documents of ownership (in the case of secondary real estate)
• Permission from local authorities to acquire the property

In addition, you will need to provideconfirmation of payment of the stamp dutyandbank referenceIf the borrower is a business owner, tax returns for the last three years and company incorporation documents must also be included. If the borrower is a business owner, tax returns for the last three years and company incorporation documents should also be included.

Additional requirements

An important point is the possible additional requirements, such as:

• Opinion of a licensed appraiser on the condition of the object in question
• Documents confirming the client's financial capability

All documents must be translated into English or Greek and properly notarized.

It's important to know

One thing to keep in mind,Before submitting an application, you need to make sure that reports are accepted only from those appraisers who are listed in the banks' lists. Usually, the mortgage application review process takes from two to four weeks, so it's worth planning your time and actions in advance.

Conclusion

In conclusion, I would like to emphasize the importance of the situation in the mortgage lending market in Cyprus in the post-pandemic context. With the unexpected changes brought about by COVID-19, the market has demonstrated flexibility and the ability to adapt. In the first half of 2020, we faced a sharp decline in lending volumes, however...state supportwith interest subsidies helped not only to restore interest in mortgages, but also to stimulate the sector. In fact, after the first restrictive measures, there was an increase in lending volumes, indicating pent-up demand from borrowers.

Mortgage lending conditions

It should be noted thatmortgage lending conditionsFor foreign clients in Cyprus, the conditions differ from those for locals, which can affect the ability to purchase real estate. Stricter requirements for down payments and interest rates for non-residents necessitate a serious approach to preparing and processing documents. Clients must clearly understand all the risks and nuances in order to successfully navigate the lending process.

Key points for borrowers

• The banks here carefully analyze financial capability.applicants.
• Having a stable income in euros or British pounds can significantly increase the chances of approval.
• It is recommended to prepare thoroughly for the process — from checking your credit history to gathering the necessary documents.

Investment opportunities in Cyprus

Cyprus offers asinteresting investment opportunitiesThere are also attractive living conditions, so despite the challenges that arise during the mortgage process, I believe that with proper planning and understanding of the market, one can achieve their goals.

In conclusion, I hope that my article has served as a useful guide for everyone interested in mortgage lending in Cyprus and will help you confidently take the first step towards acquiring your own home on this beautiful island.