Hungarian Property Mortgage info for buyers of Hungarian Property

If you are considering buying a property in Hungary and would like indepth advice about mortgages, please contact us.

Many property investors who are interested in the Budapest property market and the wider Hungarian market contact us with questions about financing their property investment in Hungary and  mortgages in Hungary . Often, gaining an understanding of the mortgage market here is an essential part of their research when they ask the question why buy property in Budapest and Hungary?

So I decided to share with you some of the most frequently asked questions and answers. I hope that you find this information useful.

Richard Holmes, Managing Director of Gateway Properties.

How can I raise finance to buy property in Hungary?

There are three options available.

1. Arrange a mortgage through a bank in Hungary. Several international banks operate in Hungary that lend to Hungarian property purchases.

2. Release equity from property which you own outside of Hungary.

3. Use a property in Hungary which you already own as security. Hungarian banks will allow you to borrow against your existing property if the purpose of the loan is to invest in another Hungarian property.

Can I secure a loan against a property in Hungary from a bank in my home country?

Investors have the possibility to raise finance in their home country e.g. Ireland, UK, Spain, using their property as security. However you cannot offer a Budapest property as security to a bank located outside of Hungary. You can only raise finance against a property in Hungary by applying for a Hungarian mortgage with a bank located in Hungary.

Will I get the best mortgage deal if I buy as an individual, or if I establish a company when buying my Hungarian property?

It is very clear that the best mortgage deals available are for individuals rather than companies.  Often buyers of property in Hungary are advised to set up a company which buys and owns the property. However by establishing a Hungarian company you are severally restricting your financing options.

What are the advantages of getting a mortgage in Hungary as an individual compared to a company?

• Lower interest rates, typically 2% lower.
• Longer repayment terms usually twice as long, i.e. 20 years as opposed to 10 years.
• Higher loan to value i.e. typically 70%-60% compared to 50%.
• Easier to obtain credit. Generally banks in Hungary like no see the profitability of a company . A newly founded company does not have a track record of profitability.

 

What is the maximum that I can borrow to buy a property in Hungary?

Currently the maximum loan to value is 80% for off-plan and new properties. And for re-sale properties it is 70%.

What interest rates can I get?

We recommend that overseas buyers opt for Swiss Franc and Euro mortgages.

Interest rates vary as follows:

Swiss Franc 4.5% to 5.5%

Euro        5% to 7%

How competitive is the mortgage market in Hungary?

Reasonably, it is gradually becoming more developed and competitive. More options are becoming available for property buyers in Hungary, both for locals and foreign buyers. Hungary still has some way to go before its mortgage market offers the choice that can be found in the more mature lending markets of Western Europe or the US.

Does the mortgage market in Hungary help create a good climate for my Hungarian property investment?

Yes. For the property investor who takes a medium to long term view the mortgage market in Hungary strikes a good balance for an emerging property market. Finance is available, but not too much of it. What I mean by this is that 70% to 80% mortgages are available, not 100% mortgages which are readily available in countries like the UK, Ireland, and Spain.

Where is the plus point here? For the investor who takes a medium to long term view on the Hungarian property market this is excellent news.

If everybody who qualified for a mortgage in Hungary could do so just by putting down a small deposit or even no deposit at all, and if interest rates were lower, there is no doubt that the market would be experiencing a major boom right now. This boom would be driven both by domestic demand and foreign investors and prices would soar. This is not happening, yet! If it was you would be buying too late and would have missed out on a lot of growth.

Who is best able to advise and help me with a mortgage in Hungary?

This is very simple. I think that it should be a mortgage broker who has the following attributes…

• A specialist in Hungarian mortgages.
• the ability to access all available lenders.
• located in Budapest.
• native English speakers on its staff.
• Hungarian staff.
• have good relationships with lenders.
  
  

Why?

If a mortgage broker does not focus on one countries mortgage market but deals instead with many, they cannot be specialists or experts in any.   We are contacted on a regular basis by buyers who are experiencing problems with their mortgage application because they are using a UK based mortgage broker to arrange their mortgage in Hungary. It is best to use a specialist with local knowledge.


Choice is of course very important, need I say more.


If your broker has a local presence there are several advantages to you. Necessary documents can be collated from the Hungarian lawyer or the land registry, checked by the broker and be hand delivered to the bank and checked again by the banks staff. Helping to make the process swift and efficient.


Having Hungarian staff means there will not be communication problems between the broker and the bank’s staff caused by language barrier.


By being on the ground a broker can keep their finger on the pulse, and will be aware of new mortgage products that become available.


Being in regular contact with key staff of the local banks helps to develop good relationships. This can often be useful when it comes to getting things done, like a quick decision for example.


Our sister company Gerrards International, are a  firm of Independent financial advisers who are located in the heart of Budapest and offer a mortgage broking service for clients of Gateway Properties.


If you have a mortgage or Hungarian property related query please contact us!