Mortgage for buying property in Romania
Florian Ionescu, Wednesday, 22 January 2014
This article is part of a series of 8 articles about buying property in Romania. The other articles in the series cover the following topics:
Mortgages on Real Estate for Foreigners in Romania
According to a survey conducted by theCentral Bank of Romania on the most important ten banks operating in Romania, the loan requirements are stricter now in the mortgage area but have remained unchanged with consumer loans. The main reason is the increasing demand for mortgage loans, the average advance rate reaching 25% and the average degree of indebtness reaching 47%. The loan requirements are also stricter in the countries in the Euro zone, especially those on mortgage loans.
Can foreign investors obtain mortgage loans?
The mortgage loan law has been modified so as to also allow foreign investors to take mortgage loans from banks. By definition, a mortgage loan can be obtained to purchase property based on a formal mention of the guarantee provided. In other words, this type of financing presupposes the purchase of property or land within the Romanian territory. However, foreigners are still unable to purchase land in Romania, according to the current law, so they can only obtain mortgage loans on a number of conditions, namely if the deed of sale is concluded in a partner’s name. Moreover, banks require that the reimbursement be guaranteed by a garantor residing in Romania or that the foreign investor sets up a company headquartered here.
Residing foreigners have access to almost the same products as Romanian citizens at the moment. However, some bank representatives mention that it is preferable that the financing be guaranteed by a person, husband or wife, with Romanian citizenship. Other loan institutions emphasize that the person applying for a mortgage loan must also have fiscal residence in order for them to be able to track their income.
Figures related to mortgages offered to foreign investors
In Romania, people have only been accustomed to the concept of mortgages as of lately, but the demand for mortgage loans has increased rapidly and significantly. Implicitly, the mortgage system is also new for foreign buyers, but the requirements are not necessarily very difficult to fulfill.
Capital and repayment mortgages are offered over a maximum period of 35 years and can be requested by any foreign investor aged between 18 and 65 years old, which is the retirement age in Romania. The thresholds in terms of value are also highly reasonable with a minimum one set at 5,000 EUR and a maximum one set at 500,000 EUR. However, those interested in obtaining this type of financing for their real estate purchases should be able to cover 25% of the total property value, a mortgage loan only covering up to 75% of it. At the same time, the value of the mortgage should not exceed 35% of the investor’s income. Some institutions require a minimum income level, usually of around 200 EUR. Some also require a minimum work experience of six months or even one year in the case of those making profits from independent activities.
Once granted the funding, the investor can obtain an interest rate between 4% and 6.5%, depending on whether the interest is fixed or variable. Thus, the minimum fixed interest rate is set at 4% whereas the minimum variable one is set at 6.5%.
The mortgage loan rates are one of the main factors of the housing market in Romania. The currencies used with capital and repayment mortgages are RON, EUR and USD, but it is important to note that the real estate market of this country is dominated by the foreign currencies.
The Central Bank of Romania has decided to loosen the requirements on down-payments, thus facilitating 100% mortgages and making them much more accessible to Romanian and foreign investors alike. The purpose of this decision is to increase the prices by approximately 15% so as to encourage the development of the real estate market.
Most new build and off-plan developers allow for their mortgages to be repaid within 1 to 5 years, i.e. 12 to 60 months, the fees varying from one developer to another and repayments being linked.
Documents needed for mortgage loan application
The documents to be submitted with the bank by any investor interested in applying for a mortgage loan supplied by a bank usually include the following:
An application form
An identity card/passport
A marriage certificate (if any)
Documents to prove the investor’s steady income
Property documents
Additional documents: House/Life insurance policies - All banks require the conclusion of a house insurance policy while some of them also require the conclusion of a life insurance one. In some case, these policies are issued for no fee or they may be optional. These insurance policies grant financial protection in the event of accidents or other situations that might interfere with the repayment of the mortgage loan.
This list may also include documents necessary for the valuation of the property or any documents that can confirm the value of the property targeted by the investor.
This article is part of a series of 8 articles about buying property in Romania. The other articles in the series cover the following topics:
Mortgages on Real Estate for Foreigners in Romania
According to a survey conducted by theCentral Bank of Romania on the most important ten banks operating in Romania, the loan requirements are stricter now in the mortgage area but have remained unchanged with consumer loans. The main reason is the increasing demand for mortgage loans, the average advance rate reaching 25% and the average degree of indebtness reaching 47%. The loan requirements are also stricter in the countries in the Euro zone, especially those on mortgage loans.
Can foreign investors obtain mortgage loans?
The mortgage loan law has been modified so as to also allow foreign investors to take mortgage loans from banks. By definition, a mortgage loan can be obtained to purchase property based on a formal mention of the guarantee provided. In other words, this type of financing presupposes the purchase of property or land within the Romanian territory. However, foreigners are still unable to purchase land in Romania, according to the current law, so they can only obtain mortgage loans on a number of conditions, namely if the deed of sale is concluded in a partner’s name. Moreover, banks require that the reimbursement be guaranteed by a garantor residing in Romania or that the foreign investor sets up a company headquartered here.
Residing foreigners have access to almost the same products as Romanian citizens at the moment. However, some bank representatives mention that it is preferable that the financing be guaranteed by a person, husband or wife, with Romanian citizenship. Other loan institutions emphasize that the person applying for a mortgage loan must also have fiscal residence in order for them to be able to track their income.
Figures related to mortgages offered to foreign investors
In Romania, people have only been accustomed to the concept of mortgages as of lately, but the demand for mortgage loans has increased rapidly and significantly. Implicitly, the mortgage system is also new for foreign buyers, but the requirements are not necessarily very difficult to fulfill.
Capital and repayment mortgages are offered over a maximum period of 35 years and can be requested by any foreign investor aged between 18 and 65 years old, which is the retirement age in Romania. The thresholds in terms of value are also highly reasonable with a minimum one set at 5,000 EUR and a maximum one set at 500,000 EUR. However, those interested in obtaining this type of financing for their real estate purchases should be able to cover 25% of the total property value, a mortgage loan only covering up to 75% of it. At the same time, the value of the mortgage should not exceed 35% of the investor’s income. Some institutions require a minimum income level, usually of around 200 EUR. Some also require a minimum work experience of six months or even one year in the case of those making profits from independent activities.
Once granted the funding, the investor can obtain an interest rate between 4% and 6.5%, depending on whether the interest is fixed or variable. Thus, the minimum fixed interest rate is set at 4% whereas the minimum variable one is set at 6.5%.
The mortgage loan rates are one of the main factors of the housing market in Romania. The currencies used with capital and repayment mortgages are RON, EUR and USD, but it is important to note that the real estate market of this country is dominated by the foreign currencies.
The Central Bank of Romania has decided to loosen the requirements on down-payments, thus facilitating 100% mortgages and making them much more accessible to Romanian and foreign investors alike. The purpose of this decision is to increase the prices by approximately 15% so as to encourage the development of the real estate market.
Most new build and off-plan developers allow for their mortgages to be repaid within 1 to 5 years, i.e. 12 to 60 months, the fees varying from one developer to another and repayments being linked.
Documents needed for mortgage loan application
The documents to be submitted with the bank by any investor interested in applying for a mortgage loan supplied by a bank usually include the following:
An application form
An identity card/passport
A marriage certificate (if any)
Documents to prove the investor’s steady income
Property documents
Additional documents: House/Life insurance policies - All banks require the conclusion of a house insurance policy while some of them also require the conclusion of a life insurance one. In some case, these policies are issued for no fee or they may be optional. These insurance policies grant financial protection in the event of accidents or other situations that might interfere with the repayment of the mortgage loan.
This list may also include documents necessary for the valuation of the property or any documents that can confirm the value of the property targeted by the investor.
All types of property for sale in Romania by private sellers and estate agents. Find your perfect apartment, house or farm on the Black Sea coast or in the Carpathian Mountains.
This article analyzes the real estate buying process under the Romanian law currently in vigor from the selection of the property by the investor to
the conclusion of the sales-purchase agreement and the validation of the transaction. All proceedings should be carried out or assisted by a lawyer,
who represents one of the three key factors in the process along with the real estate agent and the notary.
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