However, when buying real estate, situations sometimes arise when in order to realize the dream of a “second home” it is necessary to take out a mortgage in Croatia. In this case, the best option is to borrow the missing amount from one of the local banks offering the most profitable – and in the case of Croatia – no alternative mortgage lending program.
Mortgage in Croatia: conditions for obtaining
Many European countries, interested in implementing the so-called “drain” of real estate that has formed over the years of the crisis, offer loans to solvent foreign citizens for the purchase of housing on favorable terms, but Croatia is not one of them. The problem lies in local legislation, which is slowly beginning to turn towards potential owners of apartments and villas who have a different citizenship.
The most important rule, which rather seems to be a limitation for a foreigner who does not have a residence permit in this country, is that a mortgage in Croatia is possible in one and only case. To do this, a citizen of another state must register a legal entity in his name – a company that will not just exist on paper, but also conduct real activities, providing all required reporting to tax and social authorities.
However, even if this condition is met, which involves a cost of time and finances, a company with a Russian owner without a Croatian residence permit has only one option: a mortgage in Croatia at a local branch of Sberbank. The latter, being a monopolist in this market, provides conditions that are unlikely to seem attractive to citizens of the vast majority of European countries. For example, with a mortgage of 100 thousand euros, the overpayment after 15 years at an annual rate of 8% (usually standard for non-residents) will be almost 70 thousand euros.
Mortgage in Croatia for Russians
Restrictions on mortgages apply not only to ordinary Russians who own so-called “vacation” real estate, but also to owners of companies organized for this purpose, provided they do not have a residence permit in Croatia. In this case, the loan can also be issued only by the local Sberbank, and its amount will be up to 250 thousand euros at 6-8% per annum for a maximum period of 15 years for citizens of the Russian Federation.
Mortgages in Croatia for Russians, even under such conditions, are issued only if at least 40% of the cost of the residential property has already been paid.
The list of requirements for potential borrowers also makes us think about the advisability of using such a financial instrument as a mortgage loan. In addition to the standard set of documents, which includes a loan application, as well as copies of foreign and national passports, you will need a lot of papers indicating the client’s creditworthiness. Among them are the following documents, documented and translated into Croatian:
- local tax identification number (Osobni identifikacijski broj);
- Russian form 2-NDFL with a monthly income of 3 thousand euros per month for single people and 4 thousand euros minimum for married people;
- real estate purchase and sale agreement along with permits already received from the Ministry of Foreign Affairs and the Ministry of Internal Affairs of Croatia;
- availability of permanent official work in Russia for at least a year from the date of application;
- an extract from the Land Register and the Cadastral Chamber with a real assessment of the value of the property;
- energy certificate for the property being transferred into ownership.
In addition, the Croatian Sberbank may at any time request those documents that seem more convincing as confirmation of the client’s solvency, and the time for reviewing the entire package may increase by several more weeks.
Mortgage in Croatia for Russians with a residence permit
Foreigners who have received a residence permit in Croatia are in a more advantageous position in all respects. Firstly, they are serviced by Raiffeisenbank, which offers completely different conditions. First of all, we are talking about the mortgage lending rate for citizens and residents of Croatia, which is already more or less close to the average European indicators: a fixed rate from 4.5% to 6.25% per annum, which, however, is considered to be clearly too high in comparison with Spain or Portugal.
It is enough to already own – that is, paid for – 35% of the total cost of the property if we are talking about apartments, or half the cost when the subject of sale is a detached house. To the resulting amount should be added a whole range of “banking services”, the amounts of which can vary greatly from the value of the property. Examples include loan servicing fees, home insurance fees, and bank account maintenance fees.
It is not surprising that almost all foreigners, including Russians, try to think again about whether they need a mortgage in Croatia, the registration of which often brings practically nothing except unnecessary hassle and problems. Especially if we bear in mind the further growth of the euro against the ruble and a noticeable decrease in the incomes of Russian citizens.