When you find the property that you want, a reservation fee or small deposit will be required. The amount can vary, but is usually around 2,000 to 3,000 euros. You’ll want to make sure the fee is refundable in the event that you cannot get a mortgage or have to pull out of the purchase. I cannot stress this point enough – every week I get emails from people who put money down not realising that deposits are often not refundable…

The reservation fee allows you take the property off the market and freeze the price.

Some buyers use their debit or credit card to pay the fee as this is convenient and means that they do not have to carry large amounts of cash around with them. However, it’s expensive because of the add-on charges and the poor exchange rate given by the bank or credit card companies.

One way of overcoming the add-on fees and poor exchange rates is to open an account with a currency company prior to your trip and placing a small amount of sterling with them – enough to cover 3,000 euros. If and when you choose to make a reservation an exchange and transfer can be sent to Cyprus very quickly. And if you decide not to place a reservation, the currency company can move the money back into your account in the UK.

So, that takes care of the reservation fee…

How about the remaining £50,000 or £100,000 or £150,000 or …..? In the full Cyprus Buying Guide I discuss a wide variety of finance options including paying cash, getting a local mortgage, getting an off-shore mortgage, releasing equity from the UK and the run down on Swiss Franc mortgages…however for the website I’ve created a quick synopsis to give you an overview. If you want to understand this information in further detail, please purchase the Cyprus Buying Guide here.

Moving on… The options you have to purchase a property:

a. Paying Cash

If you have the cash available then the whole payment process is quite straight-forward. You simply pay when the money is due.

Also note that local currency (Euros) can be reserved at today’s currency exchange rate for purchase in the future. This is a very simple way to ensure that you don’t unduly suffer from adverse currency movements. I have heard horror stories where the cost of a property has increased by 20% in sterling terms from what was originally budgeted. Even if you thought you had the cash available, a 20% increase may change this. Once you know, you’re going to need to pay cash, contact Smart Currency Exchange to discuss a strategy to ensure you get the best rate.

This is key: If your purchase is dependent on the sale of a property (i.e. selling in the UK) make sure that all contracts, including the reservation fee contract, have made this a condition of the purchase.

b. Local Cyprus Mortgages

This is a somewhat complicated thing to explain. Cyprus doesn’t really have mortgage brokers…well, they have a few, but I’m not sure what you would pay them for as you’re usually ‘forced’ to use the developer’s bank. Let me explain…

If you buy a new property off-plan (which most people do), you’ll need to get a mortgage from the bank that the developer has a mortgage for the land on. Did that make sense? Hehehe…
Okay – the developer goes to the bank and gets a loan to build properties. The bank gives the developer money based on the security of the land.

When you go to buy a property on the land that the developer has mortgaged, you then have to:

1. Use the same bank the developer used as they’ve already deemed the developer worthy and will thus guarantee that they’ll either pay back the loan or they’ll take the land and sell it or:

2. Use another bank with other mortgage offers HOWEVER you will have to get a bank guarantee. A bank guarantee will cost you 1.5% to 1.8% of the value of the property annually (until you get the title deeds). If you choose to use a bank independent from the developer you will be required to get a guarantee.

There is a way around this situation, but it’s quite awkward and you have to get the developer to go for it… If you want further explanation, just email me.

If you’re buying a re-sale property and want to get a mortgage, the best thing you can do is visit the main banks and see what their deals are. It’s very easy for you to get to each bank, compare the offers and make a decision. In the UK there are thousands of packages, thus the need for a mortgage broker…in Cyprus there is quite a limited choice.

Okay…other stuff:

The Cypriot mortgage market is not as developed as the UK market and the competition is not as stiff, but, the local banks are still keen to lend. Depending on your status, a loan can be obtained from 80% on your first property.

Mortgage periods can be up to 30 years. Repayment is interest and capital. Interest only mortgages have just started to come in, but they’re interest-only for a set period of years rather than for the duration of the loan. Better options will most likely come in time.

The age limit for a mortgage is up to 65 although flexibility has been shown up to the age of 70 for individuals with suitable assets and/or private pensions.

The banks use a scoring system similar to the UK. One key test is the ability to make the repayments [remember capital and interest]. For this, the banks will require that the repayments on your mortgage and other credit agreements you have are less than 35% of net relevant earnings.

Net relevant earnings include income from all sources [e.g. employment, rental income, pensions, etc.] and from which you deduct certain costs such as tax and pension contributions. The banks are trying to establish a level of net income that will be more than enough to cover your ongoing and regular payments.

The process is very quick if you are organised and able to provide the necessary documentation rapidly. If you are really on the ball you may be able to get a principal offer from a bank within a matter of weeks.

To learn more about mortgages in Cyprus, please review the interview transcripts located in the ‘Your Questions Answered,’ Bonus. I interviewed Constantinos Michael Antoniou CeMAP, a Cypriot who is based in the UK and Cyprus and is a FSA regulated Mortgage broker. You can get more information on the guide here.

Expert advice is required so consult a recognised bank when you’re in Cyprus.

c. UK mortgage

You cannot get a UK mortgage for a property anywhere overseas. HOWEVER, you can re-mortgage or mortgage an existing UK property to pull out equity to pay for a property in Cyprus.

This is very easy and due to the huge increase in capital appreciation in the UK – it almost seems like everyone is doing it.

So…let’s say that you’re property in the UK has increased by £100,000 in the last 10 years. You then re-mortgage the property, pull out the £100k and buy a property in Cyprus. Then…if you want someone else to pay for the mortgage, you simply rent out your Cyprus property. Heck…if you rent to British people, you can charge them in Sterling and pay it against your Sterling mortgage.

Expert advice is required so consult a recognised mortgage broker in the UK.

I have a VERY good contact that has helped several Cyprus Buying Guide readers to re-mortgage their property. If you’re interested please go to my Resource Form, fill out you details and enter in the space provided that you’d like to discuss with someone a UK mortgage or re-mortgage. Go to:

http://www.cyprusbuyingguide.com/resources.htm

d. Other Mortgages and Borrowings

In the guide, I also discuss mortgages in other currencies (Euro/Swiss Franc), bridging finance and equity releases schemes so please check it out if you need further information.

Lastly…I want to take the opportunity to mention IFA’s… or Independent Financial Advisors. Many people don’t know what they are…or think that only wealthy people use them. Until a few years ago, until I used one, I had no idea what they were…

Well…IFA’s can be all sorts of things. Some help with pension, some do mortgages…others help with various funds/options and even help to invest money into property – whether it’s a fund, syndication or actual development.

Any way – with an IFA, they can look at all your assets/investments and explain the best and most economical way to do future investments. They help buyers to avoid paying unnecessary tax, structuring companies, getting off-shore accounts and a whole bunch of other things. AND – unlike mortgage brokers who often take a % of the value of the mortgage (for payment) there are some IFA’s that simply charge a flat fee…and usually that fee is more than covered by the money they save you. They really are incredible.

If you’d like to be put in touch with the IFA I use and have been VERY happy with, please go to my resources form and enter your details in the form in the IFA box. Go to: http://www.cyprusbuyingguide.com/resources.htm