Purchasing a real estate in Latvia by taking a mortgage credit
In Latvia it is possible to purchase a real estate by taking a mortgage credit in Latvian bank. There must be several provisions corresponded to get a financial support from a bank which can be evaluated quickly making the evaluating of loan receiving opportunities quick when purchasing a real estate in Latvia.
What is mortgage credit in Latvia?
Mortgage credit is a long-term loan that is provided with real estate pledge (it can also be a real estate you want to purchase or built). Mortgage credit is mostly for purchasing a housing, improvement, decoration and building as well as other big purchases.
What are preconditions to receive a mortgage credit?
Co-financing is obligatory in this economic situation because banks are interested in financing purchasable real estate together with the customer. The time when it was possible to receive a 100% loan from banks was over in 2008. Nowadays it is possible to receive 80% from the estate value but mostly loan amount given by banks is 60% to 70% that means that the remaining part that is about 20% to 40% from necessary financing must come from the customer. The opportunity to decrease the co-financing is offering bank a pledge.
Stable income every month
The bank wants to be sure that the customer will be able to cover liabilities regularly and by appropriate amount from customer’s monthly income. Income must be real and fluent which are salary, dividends or other income received in the last 6 months which are acceptable for the banks because existence of cash in another bank’s account or existence of cash will not assure bank that the customer has constant cash flow. Interest rates of mortgage credit. Minimal requirements for a customer to be able to achieve credit liabilities is covering 40% from his/her monthly income. Example: If INVEST RIGA customer wants to receive 300 000 EUR in the bank with 6% annual interest rate for 10 years then monthly loan interest amount will be 1500 EUR and 2500 EUR for the loan (total amount: 4000 EUR in a month). Customer’s monthly income must be 10 000 EUR from which 40% = 4000 EUR will be monthly payments for covering the loan. It is important that the bank can agree to calculate total monthly income from all family monthly income.
There must be an agreement from purchaser’s spouse who is affirmed by notary to be able to purchase a real estate and receiving a loan to receive the loan for purchasing real estate in Latvia. This provision can be not taken into account if customer has a marriage contract which prescribes that customer has rights to expropriate the estate and receive a loan without the agreement of spouse.
Land register or sales contract
Estate sales contract for which the loan is needed must be signed in bank for reviewing. Banks will analyse the risks and can require for corrections in the sales contract. Mostly these corrections are a request for an opening of an account in this bank but there can also be corrections, which must be made in the contract changing the main provisions. Such changes not always can satisfy the customer or seller that means that it is possible to refuse from receiving a loan in this bank or agree with the requests brought forward from the bank.
Desired factors, which provide an advantage for the bank in making a decision about providing the loan.
Positive credit history:
In case when customer has had a loan and the liabilities are covered by complying with the contracts then this history can positively influence the decision of giving financing. Sometimes provisions prescribe that this positive history must be in the concrete bank or in the concrete country where customer wants to receive the financing. All documents confirming positive credit history of the customer are suitable.
Having monthly income (salary) in another bank:
Receiving the monthly income, salary in the bank where the customer wants to receive the mortgage credit is a positive factor in making a decision. The bank quite often may request to open the salary account at their bank that would make it possible to operatively follow all the payments of the customer.
Additional guarantee or loan guarantors:
Important factor for the bank can be a guarantor or guarantee as the loan hedgers. If the bank is not satisfied with the guarantee then the guarantor can be as the only chance to get the loan. The warranty of a resident can be the most necessary thing for receiving a loan for a non-resident. Guarantor must have a positive credit history and valuable assets.
Additional assets for receiving a loan:
If a customer has additional assets such as shares, different securities and real estate which are not problematic then these assets can serve as additional pledge value that can increase the chance to get the loan.
Loans existing in other finance institutions:
Loans existing in other banks can decrease the chance to get a mortgage credit. We suggest to turn to that bank where already loans have been taken because banks looks on the cases when borrower is in insolvency situation and when he/she has liabilities in other banks, countries then bank will have to fight with property financed. Trust is very important for a bank. It must see an know finances of the borrower and must be able to prognosticate the opportunities and threats as well as bank must be sure that there are no other pretenders to customer’s estate. We suggest to not tell about liabilities which are in other countries and even if these countries are not in European Union.
Bothers of purchasable estate:
Loan receiving can be negatively influenced by such bothers as status of state cultural monument, nature protection areas, the subject of a court, mortgage etc. Decision is made by the bank’s credit committee which work and decisions are made easier by simplicity and apprehensibility of financeable object.
Negative credit history:
debts of public payments, delayed penalties, being in different blacklists etc. are causes for denial of credit.
Breaking the law:
Troubles with complying with law, frequently administrative offences, penalties.
INVEST RIGA – specialists with experience in solving different problems
Important role is played by customer representatives, which know how and are able to represent customer interests in banks of Latvia. No doubt. Such services take additional finances but the result can be better and decision-making can happen more quickly as well as provisions can be more advantageous. INVEST RIGA specialists offer these services.
Decision can be influenced by relatives and friends
If the customer has relatives involved in banking who play role in decision making, receiving of loan can be easier. Or if there are relatives who are in fiends with the main personal of the bank, it can influence the process of dealing with requests and results. INVEST RIGA offers such services.
If the customer is a non-resident of Latvia:
Resident’s warranty is almost always necessary to receive the mortgage credit. Not all documents confirming resident status are employed. Non-residents get financing from 50% to 70% of whole necessary amount. It is important to show all documents which certify your income in other countries, receipt of salary, annual declarations and other documents.
Liquidity ratio of the purchasable estate – low:
In case when estate has low liquidity (as bank describes – it is hard to sell the object in the opened market) the loan can be declined.
Inner strategy of bank crediting:
Banks has their own inner strategy where the financeable estates are prescribed. Provisions can be related to the type of estate: for example – apartment series or the location of property and its territory. In this case, if bank is principally not supporting giving the loan, if one of forbidding provisions of strategy is done, it is allowed to give any information to the banks but it will not give the loan. This information must me known before making activities to not to waste time.
INVEST RIGA has such experience and opportunities to solve such problems by knowing in what banks it is possible to receive a positive answer.