Buying real estate is a unique life experience for most buyers, as the choice directly influences the buyer’s quality of life. Some buyers, due to various circumstances, opt for financing through a housing loan. We consulted Mr. Marko Perić, director of Optimum Grupa d.o.o., a licensed credit brokerage agency, for insights into the financing process and several important pieces of information.
We found a property we would like to buy. What is the first step toward loan approval?
The first step is always to check creditworthiness and the legality of the property that interests the buyer. This can be done at the bank with a personal banker or with a licensed credit broker authorized by the Croatian National Bank (HNB). When checking creditworthiness, the calculation is usually standard, but some banks include additional allowances (transport, meal allowance, separated life allowance, fieldwork, etc.). Some banks require the loan term to end by the age of 65, while others allow up to 70 or 75 years. Considering these two factors with different interest rates, the loan amount a client can get may vary by tens of thousands of euros depending on the repayment period and salary allowances. When it comes to the legality of the property, having a clean title deed and other documentation depending on whether it’s an apartment or house is not enough; all details must be reviewed with a personal banker or credit broker. Common issues include enclosed balconies converted into rooms or houses built on someone else’s land, or missing easement rights. If there are doubts, the client can order an appraisal, often free at the bank, or make one at their own expense to avoid future problems.
What documentation should be prepared for a meeting with the credit broker or personal banker?
Since applying for a housing loan is a complex process, banks try to simplify and speed it up while making approval easier for clients. Some banks look at the average of the last three net salaries, others at the median of the last three months, or even six or twelve months. For a start, it’s best to bring property documents and the last three pay slips. If the bank looks at six or twelve months’ averages, the JOPPD form (income and tax form) can be easily obtained via the e-Citizens portal. If you apply at your home bank where you receive your salary, income forms may not be necessary. At this early stage, a credit broker can offer an advantage by calculating creditworthiness for several banks free of charge.
Are the conditions the same for a house, apartment, or building land?
Generally, yes. The difference lies in the property documentation required for the appraisal and legality verification. For buildings with more than seven apartments, only a title deed and, possibly, a use permit and energy certificate are needed. Smaller buildings require possession lists and cadastral extracts. Houses require a building permit and sometimes a house number certificate. For building land, a title deed and proof of the building zone status (building permit or zoning decision) are sufficient.
Does the location of the property affect financing conditions?
Yes. Depending on location, banks assess the property-to-loan value ratio differently. It’s not the same if the property is in Zagreb or Split or a smaller town. Some banks require a 1:1 ratio, others 1:0.9 or less, meaning buyers must cover 10%, 20%, or more from their own funds. APN programs usually accept 1:1 ratios.
How do loan conditions vary among Croatian banks?
We covered most aspects earlier (creditworthiness, property value, loan term), leaving interest rates and fixed-rate periods. Interest rates have risen over the past year. In 2022, APN loans had rates below 2%, regular housing loans slightly above 2%, depending on employer, bank choice, income, and other parameters. Early 2023 rates exceeded 3%. Fixed-rate periods range from 3 to 10 years, with some banks offering up to 15 years. According to law, clients can refinance without fees to reduce costs or adjust repayment terms.
Are there terms buyers should know during the approval process?
Most terms are familiar, but “mortgage debtor” (založni dužnik) is often unclear. It means the owner of the property pledged as collateral, granting the bank the right to register a mortgage before loan disbursement.
What advice would you give buyers considering housing loans?
Visit multiple banks, gather multiple offers, inquire about terms (interest, fixed periods, insurance), and make an informed decision. Since loans usually last over ten years, planning is difficult. Always consult your personal banker or licensed credit broker for multiple offers in one place to choose the best option.
