Banks & Loan Facilities

Building Your Real Estate Business with Cyprus Bank Loans

Banks in Cyprus

According to the central bank in Cyprus currently operate 10 commercial banks and 18 foreign bank branches, total 28 banks. The top largest banks are the ‘Bank of Cyprus’, ‘Hellenic Bank’, ‘Eurobank Cyprus’ and ‘Alpha Bank’.  All of them offer terms and conditions for getting a property mortgage by asking specific conditions required to be provided by customers.

Nowadays the most important condition for somebody be considered eligible for a loan, is to prove that the income is generated within the European Union and even better within the Republic of Cyprus, however many more conditions and reports will be asked by the bank during the application process.

The typical loan rate is about 3.5% to 4% p.a. which is a combination of the base rate (currently 2.75% implied by the ECB) and the locals bank fee which is about 1%.    However, the loan rates can fluctuate depending on various factors  such as the loan currency, the ‘Euribor’ margin, and the base rate that can change by the European Central Bank in order to control other macroeconomic factors, such the inflation rate etc.

In Cyprus, the collateral to get a loan is usually the property that is purchased itself, but banks can ask more…Additionally, the loan applicants will require to provide the bank enough supportive documents for their ability to pay the loan and execute their agreement without problems and risk.

Primary Factors of a Mortgage

You will have to determine the fundamental mortgage parameter. For instance, the maximum amount of a mortgage is 60% of the contract value of the property, and according to it, borrowers will pay around 40% of the property value out of their own funds.

A borrower can select a method for determining the interest rate, which can be referred to as either an inter-bank rate or an internal bank rate. The length of the mortgage is calculated using a formula; the home loan terms are set for about 10-40 years, depending on the age of the borrower. The minimum loan term is typically 10 years, but early repayment may be an option, often with a penalty fee.

The interest rate for some mortgages is reviewed every 6 months, while others have a fixed rate for the initial years. Permanent residents of Cyprus usually qualify for a lower interest rate, and payments are made on a monthly basis.

To be eligible for a mortgage, an individual is required to have life insurance. Banks usually take about 1 to 2 months to make a decision on issuing credit once all required documents have been submitted.

In addition to mortgage rates and deposits, there are additional expenses such as KYC (Know Your Customer) verification fees to ensure the legitimacy of the applicant and their source of funds. These fees are typically charged by the bank and average between 0.75-1.0%. Additionally, there is usually a flat fee of around 250 Euros imposed.

Required Documents

When applying for a mortgage to purchase real estate in Cyprus, a bank typically requests various information from the applicant, including:

  • Proof of income
  • Income statement
  • Reference of employees
  • Photocopies of bank statements for the recent 3 to 6 months
  • Reference from a bank where the applicant has an account
  • Photocopies of an architectural property plan
  • Contract of sale for immovable property
  • Photocopy of international passport
  • Photocopies of payments already made to the property seller
  • Repayment information according to the previously obtained credits