10 things to know about getting a home loan (mortgage) in Croatia: Guide for 2023
When you’re considering purchasing a home and getting a mortgage, every bit of quality information and advice is welcome. It’s useful to hear other people’s experiences and read everything you can find about the subject.
It is a long-term decision, so take enough time before you make a final decision. Purchasing a property outside of your home country can be especially nerve-wracking. To make it a bit easier, we’ve laid out things that you should know before seeking a mortgage in Croatia.
In this article, we cover:
- What are mortgage and housing loans
- What is a “pledged property”
- Mortgage loan in a foreign currency
- What is a typical interest rate
- Getting back your paid interest
- What if you are older than 60
- Properties that can be purchased with a loan
- Do banks finance the total price
- Does residence status makes a difference
- Choosing your repayment schedule
The facts are these…
Crucial things to know about getting a home loan in Croatia
A mortgage loan called hipotekarni kredit is a loan in which you use your property as an insurance instrument, e.g., collateral to get a specific amount of money. If you don’t pay your loan rates to the bank on time, the bank can take this collateral property to settle the debt.
A housing loan called stambeni kredit is a loan used for the purchase of an apartment or a house, the construction of a new house, or the reconstruction and improvement of an existing house or apartment. This house or apartment is an insurance instrument and the bank can take it over if you don’t pay your loan rates regularly.
A pledged property called uložena nekretnina is a property you may use as an insurance instrument, like collateral, when applying for a mortgage loan. This gives the bank the right to take over your property if you’re not making your debt payments on time or if you have completely stopped making payments.
When applying for a mortgage loan, you will “pledge” your existing property. When applying for a housing loan, the pledged property will be your new apartment.
You do have the option to get a mortgage loan in a foreign currency. If you decide to get a mortgage in a foreign currency, make sure it is a stable one, as fluctuations can have an impact on your mortgage loan rate.
Regardless of the currency of your loan, you are required to repay your loan in euros. If you take a loan in some other currency, you will repay the loan in euros according to the HNB – Hrvatska Narodna Banka (Croatian National Bank) average exchange rate valid on the day of repayment. The latest exchange rate is available here.
Interest rates for mortgage loans can vary wildly depending on the bank, your age, repayment period, and financial situation. Every bank has its own rules. For housing loans, the interest rate can vary from 3% to 7%.
You can check out the interest rates for Croatia’s biggest banks here.
For every housing loan, you will pay a defined interest rate. The good news is that the money you pay in interest to the bank is calculated into your annual tax refund.
This means that when the state calculates the yearly amount of money that will be returned to you as a tax refund, the interest rate paid to the bank will also be included in this refund. Of course, this assumes that you are a tax resident of Croatia.
When a bank calculates your repayment period, it assumes that you will pay off your mortgage by the time you are 60. The number of years you have left before turning 60 will determine your repayment period.
If you are near or older than 60, getting a mortgage will be much more challenging. If you are considered for a loan, you may only be approved for a small portion of the purchase price or submit additional collateral. Policies vary from bank to bank.
#7 Only certain properties can be purchased with a mortgage
According to the Zakon o stambenom potrošačkom kreditu (Law on housing consumer credit) which is available here, you can get a mortgage loan for:
- Family house or apartment intended for housing or a house or apartment intended to be used for vacation rentals
- Garage or parking space, which the consumer purchases or pledges together with the property
- Land intended for the construction of a property
Banks will not fund 100% of the property purchase price. Usually, they will fund only 75%. The remaining 25% you must pay in cash directly to the owner. If you’ve reached this point, you’ve already paid 10% to the owner in the first contract. So, you only need to pay an additional 15% in cash to the owner.
These percentages may vary slightly depending on a variety of factors like the bank, your financial situation, or the house’s value, but the difference will be negligible.
Before approving a mortgage, Croatian banks want assurance that you will pay them back. If you have temporary residency, it is highly unlikely that you will be approved for a mortgage. If you are approved, it will be for a fraction of the purchase price. Most likely, you’ll be flat-out refused since you have not yet proven your long-term connection to the country, and they see you as a risk.
When issuing a mortgage, banks will always prefer:
- Permanent residents – view our guide on how to apply for permanent Croatian residence here
- Croatian citizens – view our guide on Croatian citizenship here
The exception would be for EU nationals, who are technically supposed to be treated like Croatian citizens across the board. Some banks will lend to EU/EEA nationals as long as they can prove they are getting a regular salary, whether that be in Croatia or their home country.
Concerning your repayment schedule, you have two options. You may repay your mortgage loan in equal monthly annuities/rates or annuities with a gradual increase over four repayment periods. These options depend on your bank and its policies.
Some banks will even let you choose your monthly payment due date, meaning you can decide to pay for it on the fourth day of the month, for example.
View our other property articles
- 8 things to know about buying Croatian property
- All costs when buying real estate in Croatia
- How to buy residential real estate in Croatia
- How to find property ownership records in Croatia
- How to get a building permit (građevinska dozvola) in Croatia
- How to get a mortgage loan in Croatia
- How to get a residence permit based on property
- How to set up utilities for a new apartment in Croatia
- Prebivalište and boravište: two addresses that must be registered with the police
- Residential property prices in Croatia’s biggest cities
Please note: Information provided by Expat in Croatia is only for the purposes of guidance. It does not constitute legal or financial advice in any form. Croatian laws and bureaucratic rules often change, and each personal case is individual, so different rules may apply. For legal advice, contact us to consult with a licensed Croatian lawyer. For financial advice, contact us to consult with a licensed Croatian tax advisor or accountant.