First Property Croatia

1.7% Interest Loan for Purchase of First Residential  Property

According to the latest amendments to the laws, the State subsidies will be available for apartment property in Croatia with the maximum price of 1,900€ per square metre. The Government will subsidize the interest rate of mortgage loans to first Croatian real estate purchase, on condition that the loan does not exceed 100,000€ in kuna counter value, while the maximum interest rate is five per cent per year and remains fixed for the first four years. The conditions of purchase are that the property must be newly built, and the price per square metre must not exceed 1,900€. These are the most significant amendments to the law, designed to boost the Croatia property market, and sales of newly built apartments.

Return after Repayment

This means that the property buyers will pay 1,7% interests – possibly even less -  for the first four years. According to Vecernji List, the exact amount of interest will depend on the banks which will with their terms compete in a tender, and the Government will choose the one with the most acceptable interest rates. However, these State subsidies are repayable. The beneficiaries of loans will need to return the subsidized amount to the State upon its expiration – within 60 months. It is planned that in the beginning, this repayment will be interest-free, while during the repayment period the highest amounts will be in accordance to the Law on Subsidized Housing.

Payment in Advance

Furthermore, the mortgage loan repayment period must not exceed 25 years, and the loan instalment must not be higher than one half of the monthly income of the household, or of the loan applicant. And the loan applicant must have Croatian citizenship, permanent residence in Croatia, be under 45 years of age, and not have another mortgage loan to repay (except for renovation); also he/she must not already own an apartment or a house in Croatia.

In case the loan applicant is married, the same conditions go for the spouse, i.e. he/she must not own a Croatia property , and have another mortgage. In case a married couple owns a property, the maximum loan they are entitled to, is the difference between the value of their property and the one they are planning to purchase. They will also have to comply with the bank's terms and conditions.

The Government will in advance pay one year's worth of subsidized interests to the chosen bank. The bank will sign four-year contracts with the Government, with an obligation that the interests will not change in this period. The first subsidies are planned in this year, for which 22 million kuna is secured from the State Budget. This is expected to correct the deficiencies of last year's incentive measures.

100,000€ is the maximum amount of the mortgage loan with subsidized interests – with a 5% interest rate, the total amount to be repaid is 175,000€.

584€ would one have to pay per month if he/she applies for the maximum amount of mortgage loan, with the repayment period of 25 years. 49,920€ of interests would be subsidized by the Government; however this amount is to be repaid to the State during five years. Each interest-free instalment would then be around 830€.