How To Find A Mortgage Overseas For Your Greek Home
For many people thinking of buying Greek investment property, obtaining an overseas property mortgage is a crucial part of the process. Whether you are seeking to buy a dream home in the sun, or use an investment property mortgage to generate profit, recent years have seen the process open up. As cross-border financial transactions become easier, the traditionally protective Greek banks have embraced the idea of overseas mortgages and are currently offering a range of products and options.
International Mortgages for Greece – The Basics
In theory, applying for and obtaining an overseas mortgage in Greece is no more difficult than finding an investment property mortgage in the UK, and the process is fairly similar. However, due to the conservative nature of Greek lenders and the slow-turning wheels of Greek bureaucracy, the approval process a little slower than Northern Europeans and North Americans are used to.
However, as long as you take your time and you are meticulous in your research, there is nothing to be afraid of. Of course, there is always the option of releasing equity from your home, or seeking a mortgage in your home country, but there is no harm in casting the net a little wider and exploring all of the options. Greek investment property mortgages are becoming much more competitive and transparent, opening the market up for real estate investments in the country.
The key is to begin your search for a mortgage well before you start the search for property, to ensure that you have adequate funds in place for the Greek luxury property of your dreams. As with the UK, the vast majority of Greek banks will agree a mortgage in principle, letting you know your budget if everything goes to plan. You can also take out a mortgage to purchase land or make home improvements, the most common type of mortgage amongst Greeks.
Help To Buy A House: Off-Plan Purchases And Staged Investment Property Mortgages
Many property investors in Greece are keen to take advantage of one of the many off-plan property purchases, usually resulting in more property for the dollar. Traditionally, Greek banks were somewhat reluctant to release money until the property is complete, so staged payments were rare. However, due to the increase in off plan and self-build projects in Greece, fuelled by foreign investors, some banks, notably Piraeus Bank, are easing the restrictions.
Greek banks tend to err on the side of caution, especially since the recent mortgage driven economic crisis, and only release up to 80% of the property value. Banks in Greece usually charge a 1% arrangement fee, and an application fee of €100 to €150.
Financing Your Home – A Range of Greek Investment Property Mortgage Products
Overseas mortgage products in Greece are very similar to those offered in the UK, Northern Europe and North America, with fixed rates, variable mortgages and a whole range of options. However, Greek banks tend to shy away from interest-only mortgages, although some do offer a two year period of interest only, followed by reversion to repayments.
In addition, Greek banks rarely charge penalty fees for partial or total early repayment, which is great if you want a short-term mortgage, whilst you try to sell a house in your home country, or if you want a Greek investment property mortgage to develop property and turn it around for a profit. Greek banks insist that you have buildings insurance and recommend that you take out life insurance, although this is not mandatory. You can take out mortgage protection insurance, if you wish, and this is entirely down to personal choice.
As with a mortgage application in your own country, you should seek independent financial advice before signing anything. In Greece, banks insist that the minimum is €35 000, the minimum age is 21, and the maximum age upon maturation is usually 70 upon maturation. Interest rates for mortgages tend to be a little steep, yet another factor in deciding whether to approach a Greek bank or stick with a bank in your home country.
Financial Fluctuations – Meeting Mortgage Repayments
The other difficulty with obtaining a mortgage overseas is the difference in interest rates and exchange rates, which can seriously affect you ability to repay. As an example, when we bought our house, the rate of exchange was around £1 to €1.5. Now, the rate is hovering around the £1 to €1.1 mark, a huge difference if you are paying a substantial sum of money every month, so make sure that you have enough of a buffer by leaving a safety margin.
One thing to watch out for, when finding a property within the budget of your mortgage in principle, is to bear in mind that you have to pay property taxes and costs in Greece. These can be as much as 15% of the property value, possibly slightly more for off-plan and new builds subject to VAT rather than transfer taxes.
Foreign Investment Property Mortgages: At Home or in Greece?
Certainly, one mortgage option used by many people buying investment properties in Greece is to release equity from their home and use this to buy a Greek property with cash, always a much easier process. This is an excellent option, but you must ensure that you have excellent repayment insurance in case of illness, unemployment and general inability to meet repayments. If this happens, your family home is at risk of repossession, not your Greek property, and trying to sell a Greek property quickly, to release funds, is not always easy.
Many overseas property mortgage lenders are willing to offer Euro mortgages for purchases in foreign countries but, again, you are likely to have to offer the lender security, as repossessing property across boundaries, even within the EU, is difficult. Some Greek overseas mortgage lenders have set up branches in the UK, so the process is slowly becoming easier and more transparent.
Greek Mortgage Lenders – Proof of Income
Greek lenders operate slightly differently than UK mortgage brokers and are extremely reluctant to accept self-certifications and declarations of income. Ideally, you should have at least a year’s proof of income and full accounts, and Greek banks will accept rental income as part of this. However, they will not accept proposed rental income as part of your application and also insist that you outgoings are, at most, 35% of your total income. They will then generally only allow you to mortgage a maximum of 35% of your net income, to give a safety margin.
If you are self employed, you will need:
- Audited accounts covering the last 3 Years
- Personal bank statements for the last 6 months
If you are employed, you will need
- Payslips for at least the last three months
- Personal banks statements covering the last six months
- A taxation form (P60 or equivalent) for the last 3 years. A reference from an employer is usually acceptable
- Greek mortgages are based upon net pay, not gross pay
Whether you are self-employed or an employee, you will usually require a credit report from a national agency, such as Experian in the UK. If you have all of this paperwork, the process should proceed smoothly, although it is good practice to check well in advance as some banks may ask for proof that you have no criminal record.
Overseas Mortgage in Principle – Now You Can Buy Greek Property
Now that you have a few ideas for overseas property mortgages, you will be able to lay the foundations for buying luxury property in Greece. The investment property mortgage in principle is only the beginning of the process and the next stage is to find yourself a team of skilled legal and financial professionals to smooth the process.
With the overseas mortgage taken care of, now you can begin the process of looking for your dream property in Greece.
Please note that I am not a financial advisor and this guide is intended to be a general overview. I strongly recommend that you seek professional independent financial advice before taking out an overseas mortgage.
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