Housing Loans: A complete guide

Purchasing a home is a dream for many, but it often requires financial support, mainly in the form of a Housing Loan. In Cyprus, Housing Loans are essential for those who are looking to buy, build or renovate a property. With various options available, understanding how Housing Loans function is crucial to making the right decision as to what suits best to your needs. Housing Loans are not just about financing a home, they are about building a better future.

In this guide we will cover the basics on what you need to know about Housing Loans, including the types available, their intricacies, the benefits they offer and how Ancoria Bank can help you achieve your homeownership goals.

What is a Housing Loan?

A Housing Loan is a long-term financial arrangement between you and a financial institution, designed to help you fund the purchase, construction or renovation of a home. In plain terms, the lender-Bank gives you a considerable amount of money for this purpose and in return you pay back the borrowed amount over a set period of time, along with interest. The repayment period of a Housing Loan typically ranges from 5 to 35 years, allowing you to spread the cost over time. One important thing to bear in mind about the loan term is that the debtor’s age must not exceed 65 years at loan maturity, which is the date of the final loan payment.

What needs do Housing Loans cover?

Housing Loans cater to different needs:

• Purchasing a primary residence, a holiday house or a property for investment
  One of the most common reasons for taking out a Housing Loan is to buy a residence, whether it’s your first home with intention to be your primary residence, a vacation home or even a property for investment.
• Constructing a new home on owned land
  If you already own a plot of land and want to build your own home, a Housing Loan can fund the construction process. Usually for building a new house from scratch, the Housing Loan is disbursed in stages based on the progress of the project. This ensures that you pay only for what you need at each phase of the construction, whether that’s materials, labor, infrastructure setup, engineering fees etc.
• Buying land
  If you are planning to build a home from scratch, a Housing Loan can help you cover the cost of purchasing a plot of land for this purpose. This type of loan allows you to secure the ideal location for your future home.
• Renovating an existing property
  You have found your dream house, yet it’s not newly build and in need of a renovation before you officially move in. A Housing Loan is ideal for upgrading or repairing an existing residence, as it can provide you with the flexibility to improve your living space, modernize older properties or even increase their value.

What are the key components of a Housing Loan?

Loan Amount:
The amount of money you will borrow. Typically, the sum covers up to 70-80% of the property’s value.

Interest Rate:
The interest rate is the amount of interest due on the amount that you borrowed expressed as a percentage. The interest rate on Housing Loans can be fixed (remains constant for a set period) or variable (changes based on market rates).
You can find more information about interest rates here.

Repayment Period:
The duration over which the loan must be repaid. Before applying for a Housing Loan, consider that your age must not exceed 65 years at the date of maturity.

Collateral:
A collateral is an asset of value that you agree to provide as a security or guarantee to the lender if you fail to repay your loan. In Housing Loans, the most typical collateral is the house or plot of land to be bought.

Amortisation:
Amortisation is the process of paying off a loan in regular, equal payments over a set period of time. Each payment is split into two parts: one part goes toward reducing the amount you borrowed (the principal), and the other part pays the interest charged by the bank. At the start, most of your payment goes toward the interest. Over time, as the loan balance gets smaller, more of your payment goes toward the principal. By the end of the loan term, the full amount you borrowed is paid off.
Knowing your loan’s amortisation schedule, often given by the lender, can be helpful. The schedule shows each payment and its breakdown. This way, you can track your loan’s progress and see how much of your principal amount you pay.

What are the eligibility criteria to apply for a Housing Loan?

Securing a loan in Cyprus, like in other counties, involves meeting specific requirements set by financial institutions. These rules are designed to assess your ability to repay the loan, ensuring responsible lending practices. While regulations may differ between lenders and types of loans, some criteria are applied by all.

First, to apply for a loan, you must be a legal resident or a citizen of Cyprus and your age must not exceed 65 years at loan maturity. Moreover, it is essential to prove you have a stable annual income. This shows lenders that you can manage loan payments. Additionally, you must have funds to cover up to 20-35% of the property’s value (this percentage depends on the financial institution you choose to apply for the Housing Loan, the amount you will request, the repayment period and other financial criteria).

What do you have to consider before applying for a loan?

Before applying for a Housing Loan it is essential to have the below in mind:

Assess your budget:
Think realistically and calculate how much you can afford to borrow and repay comfortably taking into account your monthly expenses.

Compare interest rates:
Research the interest rate that financial institutions offer concerning Housing Loans in order to find the best option that fits your financial situation. See Ancoria Bank’s interest rates here.

Check the repayment period:
Depending on the Housing Loan amount you will request and other financial criteria, the Bank will determine the repayment period. A short repayment period means that your monthly instalments will be higher. As mentioned before, your age must not exceed 65 years at loan maturity.

Understand the terms and conditions:
Apart from the repayment period and the interest rates, Housing Loans also have other terms and conditions that you should consider before applying, such as penalty fees if you fail to pay an installment or repay your loan early. Find out Ancoria Bank’s Terms and Conditions here.

Loan Calculator

Once you understand your finances, use Ancoria Bank’s Loan Calculator to estimate monthly payments based on different loan amounts, interest rates, and repayment terms. You can use the loan calculator anytime and without even being a customer. Simply choose the type of loan you are interested in, follow the easy steps and fill in the required details. You will be able to find out your indicative monthly installment and whether you fulfill the basic criteria to receive the loan. If eligible, you can simply book an appointment for more information, which can be scheduled as a video or phone call.

How do Housing Loans Work (in simple terms)?

The process of obtaining a Housing Loan involves the below steps:

• Application: After you do your research and find the financial institution that suits your needs, you submit an application with the necessary information, including proof of income and property details.
• Loan Approval: The bank evaluates your financial situation and the property’s value to determine the loan amount and terms.
• Loan Agreement: Once approved, you sign a loan agreement outlining the repayment schedule, interest rate, and other terms.
• Disbursement: The loan amount is disbursed either immediately (for purchases) or gradually (for construction or renovation).
• Repayment: You repay the loan through monthly installments, which include the principal amount and interest.

What types of Housing Loans are available at Ancoria Bank?

Navigating Housing Loans can seem tricky. At Ancoria Bank, we understand that everyone has different needs. Whether you are buying your first home, looking for a holiday home, or thinking about an investment, we offer a selection of solutions to match your situation. This includes the First Residence Loan for new homebuyers, the Investment Housing Loan for more experienced buyers, the option to transfer your Housing Loan from another financial institution and to purchase your vacation haven with a Holiday Home Loan. Check out our complete list of products below, designed to help make your dreams of owning a home come true.

First Residence Loan
Buying your first home is an exciting time in your life. At Ancoria Bank, we want to help you every step of the way. We offer the First Residence Loan to make it easier for first-time buyers like you. We aim to help your journey into homeownership be smooth and enjoyable. We know dealing with mortgages can be confusing. That’s why our First Residence Loan has clear and simple terms to make you feel at ease. Our team of experts is here to help. They can answer your questions and guide you through the whole process. With the First Residence Loan from Ancoria Bank, you can confidently take that big step toward owning your dream home.

Transfer your Housing Loan
Suppose you are making housing loan payments to another financial institution. In that case, Ancoria Bank has a simple solution that may help you save money on interest. Our ‘Transfer your Housing Loan’ product lets you switch your loan to Ancoria Bank, potentially receiving better loan terms. Our expert team will help you with the transfer by reviewing your current loan agreement At Ancoria Bank, we aim to make your housing loan transfer smooth and easy. Contact us today to discuss moving your housing loan to us and see the possible benefits.

Holiday Home Loan
Imagine waking up to the calming sounds of the Mediterranean Sea or being surrounded by stunning mountain views. At Ancoria Bank, we know how special it can be to own a holiday home. This is your peaceful escape, where you can make great memories with those you love. Our Holiday Home Loan product helps you turn this dream into reality. Whether you want a beachfront villa, or a charming cottage in the countryside, our Holiday Housing Loan can give you the financial support you need. Our skilled team will guide and help you every step of the way by answer any questions you have. Enjoy the happiness of having a holiday home. Create beautiful moments with family and friends with Ancoria Bank by your side as your reliable financial partner.

Investment Home Loan
Investing in real estate is still a great way to build wealth. Owning rental properties can give you a steady income without much effort. Ancoria Bank offers an Investment Home Loan for people who want to buy properties just for investment. We understand the unique financial needs when investing in real estate, and our loans are designed to help you reach your investment goals. Our professional team knows the investment property market well and they can help you through every step of the process.

Housing loans are not just about financing a home, they are about building a better future. Whatever your housing needs are –buying your first home, renovating an existing one, purchasing a plot of land– Ancoria Bank is here to help you make your dream home a reality. Contact us today to explore your options and take the first step towards achieving your housing goals.