Buying real estate on credit in Cyprus is a popular practice both among locals and foreign investors. However, before applying for a loan, it is important to understand what factors can influence the bank’s decision to grant a loan.

Legislative framework

The main regulations governing this process are:

• Cyprus Credit Institutions Law (2013), which sets out the rules and principles for the operation of banks on the island, including regulations for mortgage lending. This law regulates the activities of financial institutions, including their right to decide on the granting of credit.

• Consumer Protection Law (2012), which regulates the relationship between the borrower and the bank, protecting the rights of customers, including when applying for a mortgage loan and signing loan agreements.

• European Central Bank (ECB) Regulation, which affects the policies of financial institutions, including interest rates andrequirements for borrowers in the European Union.

Chances of Mortgage Loan Approval

When applying for a mortgage loan in Cyprus, it is important to consider several key factors that can significantly influence the bank’s decision.

• Borrower’s credit history.

One of the main factors affecting loan approval is the borrower’s credit history. Cyprus has a credit bureau system where stores information on all previous credit commitments. Banks carefully check credit history and if a borrower has negative marks such as past loan delinquencies or defaulted obligations, the likelihood of being approved is greatly reduced.

• Borrower’s income

Banks also assess a borrower’s ability to repay a loan based on their income. Cypriot banks usually require the borrower to prove stable income, and one of the key criteria is the Debt-to-Income ratio (DTI, Debt-to-Income ratio).

• Age of the borrower

Age also plays an important role in deciding whether to grant a mortgage. Banks generally require the borrower to be between the ages of 25 and 65 at at the time of the end of the loan term.

• Collateralized Property

Collateralized property is an important element of mortgage lending. Banks in Cyprus carefully assess the value of the property to be pledged as collateral. In case the borrower is unable to fulfill his obligations, the bank may sell the pledged property to cover the losses.

Loan-to-value ratio

The LTV (Loan-to-Value ratio) is the ratio of the loan amount to the market value of the collateral real estate. In Cyprus, most banks require that LTV ratio should not exceed 70%. This means that the borrower must make down payment of at least 30% of the value of the property. Thus, buying real estate on credit in Cyprus is a rather complicated process that requires careful attention and preparation. To increase the chances of approval, the borrower should analyze his credit history in advance