An increasing number of real estate buyers, as well as investors, have the desire and goal to buy real estate in Croatia. There are many reasons for that. Apart from the fact that Croatia is an extremely beautiful country with beautiful nature and historical heritage and is very safe with a low crime rate, it is often said that it is also a tax haven for those who want to invest in real estate.
Favorable tax policy and various possibilities of using real estate make it quite attractive for real estate investments. If you are a foreigner thinking about buying real estate in Croatia with the help of bank financing - a mortgage loan, here we will provide you with all the key information you need to know.
Legal basis for buying real estate in Croatia for foreigners
Before embarking on the process of obtaining a bank loan - mortgage, it is important to understand the legal basis for buying real estate in Croatia:
1. Citizens of the European Union: Citizens of the member states of the European Union have the same rights as Croatian citizens when it comes to purchasing real estate. This means that they can freely buy and sell real estate in Croatia.
2. Citizens of third countries: Citizens of countries that are not members of the European Union can buy real estate in the Republic of Croatia, but under certain conditions. Most often, a special consent of the Ministry of Justice is required, except in cases where there is a bilateral agreement between Croatia and the country they come from.
Conditions that real estate must meet for bank financing
In order for the bank to approve a loan for the purchase of real estate in Croatia, the real estate must meet certain conditions in terms of legal documentation, location, purpose, condition, value, infrastructure and energy efficiency. Before starting the process of applying for a loan, it is advisable to consult with banks and experts to ensure that the property you want to buy meets all the necessary criteria.
Here are the key characteristics that a property must have in order to get a loan more easily:
- Proper documentation - a prerequisite for buying real estate with bank financing
In short, real estate must have proper legal documentation that includes:
- Title deed – An extract from the land register showing that the seller is the legal owner of the property.
- Building and use permit that confirms that the real estate is built and used in accordance with the project documentation and the law.
- Registration in the cadastre with accurate information about the property.
2. Location of the property
Croatia has numerous location specificities and differences, therefore the location of the property itself can significantly affect the possibility of obtaining a bank loan:
- Real estate in urban areas, such as the cities of Zagreb, Split, Dubrovnik, and popular tourist spots along the coast, usually have a higher potential for obtaining loans.
- Rural or less developed regions can be more risky for banks, and it can be more difficult to get a loan for such properties.
3. Purpose of the real estate
Banks prefer certain types of real estate:
- Residential properties (apartments, houses, apartments) are most often accepted.
- Business real estate may also be acceptable, but with additional conditions depending on the type of work to be performed.
- Land is acceptable for lending, depending on the purpose and spatial planning conditions.
4. Property condition
The condition of the property also plays an important role:
- Newly built or well-maintained properties have a higher chance of loan approval.
- Old and dilapidated real estate can represent a risk for the bank, and the bank may require additional assessments and renovations before approving the loan.
5. Value of real estate
Valuation of real estate is crucial:
- The bank will hire an authorized appraiser to determine the market value of the property. It is necessary to take into account that the authorized appraiser can value the property at a slightly higher or lower amount than the one agreed with the seller.
- LTV (loan-to-value) ratio: Most banks finance up to 70-80% of the appraised value of the property, which means that you will have to provide your own funds for the remaining 20-30% as a deposit.
6. Infrastructure
The property must have the appropriate infrastructure:
- Access to basic services such as water, electricity and access road.
- Proximity to public transport, schools, shops and medical institutions can have a positive effect on loan approval, as well as on real estate valuation.
7. Energy efficiency
Nowadays, banks pay more and more attention to the energy efficiency of real estate:
- Having a valid Energy Certificate is a condition of the bank for loan approval, but at the same time the energy class itself shows whether the property meets energy efficiency standards.
Obtaining a loan - mortgage as a foreigner
Getting a mortgage to buy real estate in Croatia can be a complex process, but it is certainly possible. If you are buying real estate with the help of a real estate agency, this greatly facilitates the process and communication with the bank. Here are the key steps you need to follow:
1. Choosing a bank: The first step is choosing a bank that offers mortgage loans for foreign nationals. Some of the leading banks in Croatia that offer such services are Erste & Steiermärkische Bank d.d., Zagrebačka banka d.d. and Privredna banka Zagreb.
2. Prerequisites for obtaining a loan - mortgage:
- Creditworthiness: Banks will check your creditworthiness, which includes your borrowing history, credit rating and current income. Take into account that banks require documentation in Croatian, so you will have to submit original documents and account statements translated by a court interpreter (from your language to Croatian).
- Deposit: Most banks require a deposit (participation) of 20-30% of the real estate value.
- Documentation: You will need various documents such as an identity card, proof of income, tax returns and proof of existing debts.
3. Determination of loan conditions:
- Interest rates: Interest rates may vary depending on the bank, the type of loan and your creditworthiness. In 2024, interest rates are relatively stable, but it is always good to compare the offers of different banks. Currently, interest rates on housing loans in Croatia amount to 3-4% per year.
- Repayment term: The repayment term can be up to 30 years, depending on your age and the bank's conditions.
4. Bank loan application process:
- Preliminary approval: After submitting all the necessary documents, the bank will make a preliminary approval of your loan.
- Real estate appraisal: The bank will hire an appraiser to estimate the value of the property you want to buy.
- Final approval: After the assessment, if the property is found to be eligible for financing, the bank will approve the loan and the contract will be ready for signing.
5. Costs related to bank financing
- Loan processing fees: Banks often charge loan processing fees. Find out about these costs, so that there are no hidden additional expenses that you did not count on.
- Insurance: Some banks require real estate insurance, and possibly life insurance for the borrower.
Tips for successfully obtaining a mortgage loan in Croatia
- Prepare all the necessary documents about the property: Ensure that you have all the necessary documents to avoid delays in the approval process. If you are buying a property with the help of a real estate agency, you will probably receive this documentation from the agency.
2. Cooperation with a lawyer: It is recommended to hire a lawyer or a real estate agency that specializes in real estate to guide you through the legal aspects and the process of buying real estate in Croatia.
3. Consultation with a financial advisor or credit broker: A financial advisor can help you choose the best financing options and manage your finances during the process.
Buying real estate in Croatia with the help of a mortgage can be challenging, but with proper preparation and cooperation with the right experts, the process can be made much easier. Croatia offers beautiful real estate that is worth investing in, and with stable interest rates and relatively more favorable conditions than in other European countries, 2024 can be the ideal time to realize your plans to own real estate on the Croatian coast.
For any additional information, you can contact us at [email protected] or +385994440660.
* Although written in good faith to provide the reader with useful information and with thorough research on the subject, this text is based on information obtained from third parties. Therefore, Euro Immobilien is not responsible for possible errors in the mentioned text or its interpretation.
