Mortgage in Greece and other financing options

In many countries, it's easy for foreigners to get a local mortgage to finance their purchase of a holiday home or investment property. Unfortunately, at the moment, that's not true of Greece.

The credit crunch hit Greece much harder than other countries in the EU. The economy is still working through the aftermath of the crisis, and while the housing market has begun to recover, Greek banks are still reluctant to lend - even to Greeks. 80% of housing transactions in Greece are for cash.

The numbers tell the story. In 2006, banks granted €15.4 bn in new mortgages. Even in 2010, they were still lending €6.6 bn.

But by 2018, the market had frozen up completely. Banks were willing to lend less than €500m in new mortgages.

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Why hasn't the mortgage market bounced back?

The problem is that Greek banks still have massive amounts of bad loans on their books. Bad loans account for over €100 bn, just under half all bank loans, and about 40% of those loans are mortgages. Until the banks can address that problem, they're not going to be happy taking on new risk.

The banks have also been handicapped by legislation. The 'Katseli law' did a good job of protecting Greek homeowners who couldn't pay their mortgages due to the economic crisis, but unfortunately prevented banks taking action to close down non-performing loans.

However, October 2019 saw the EU give permission for a state-aided plan to clean up bad debt, the Hercules Asset Protection Scheme. This will take bad loans off the banks' books and put them into special purpose securities. That frees up the banks' capital, and might help get them lending again. 2019 did see growth in loans, with an estimated 30% increase in the value of new mortgages. But that still leaves the total of new loans at very low levels compared to 2010.

Mortgage conditions you can expect now in Greece

Meanwhile few banks entertain the thought of lending to non-residents; if you are already resident in Greece, you'll have an advantage. It may also be worth opening a bank account as soon as you think about buying a property in Greece; institutions are more likely to lend to existing customers.

For those who can get a mortgage, conditions are strict. Most banks won't lend more than 75% of the value of the property, and some want to see the purchaser put 50% of the price up front.

Most loans are either variable rate, or have a one year fix; at the moment the fix is around 2.9%. Some banks also offer two and five year fixes, but these only account for a small percentage of the market. The reliance on short term fixes and variable rate loans makes the Greek property market vulnerable to interest rate hikes - particularly when it's compared to, say, France, where a high proportion of mortgages are at long term fixed rates.

Loans start at comparatively low amounts. Piraeus Bank for instance lends from as little as €20,000, and the average mortgage is for €70,000. (In other EU countries many banks won't even look at amounts less than €100,000.)

Other options to finance your purchase

Of course, some foreign nationals are buying without loans. For instance, 'golden visa' buyers are plonking down cash for their properties. However, if you need finance, there are two other routes that you can take.

First, you can remortgage your existing property to raise cash, then use the cash to buy in Greece. That has several advantages, not least that you'll be working within a financial system that you already understand - and with your established credit record.

Secondly, specialist brokers can sometimes arrange finance across borders. However, though this was a thriving market before the credit crunch, many of them now find it very tough to arrange finance for Greek property. It's still worth making a few phone calls. As the Greek property market recovers, the more nimble brokers and finance houses will want to make sure they get their percentage - and specialists will be quicker on the draw than the big banks.

Whichever route you choose, kali tychi! (Good luck!)