Getting a mortgage in Croatia as a foreigner

Are you a foreigner looking to get a mortgage for a property in Greece? Here’s all you need to know including conditions, requirements, and documentation.

Croatian real estate market

While Croatia is not as well-known of a destination as other countries in Europe, there are so many reasons that make it a desirable location for expats and investors alike. Located in southeastern Europe, it has miles of Adriatic coastline and lasting Roman and Venetian influence. Croatia’s a member of the European Union (EU) but is more affordable than most EU countries and is one of the youngest countries in Europe, still full of potential. It’s known for its various outdoor activities and scenic beauty, from nature reserves, like Plitvice Lakes National Park, to islands, and rugged mountains. Italian influence can still be felt In the northern Istria region, with delicious seafood, olive oil, and wine. 

Croatia’s economy has recovered from the pandemic, with large increases in tourism driving the high-end residential market. There haven’t been many new large-scale resort developments in Croatia, so visitors are more likely to seek out rental properties. On the other hand, this also means that tourists are interested in buying Croatian real estate, with 70,000 foreigners already owning coastline properties. Interest rates remain low and house prices are rising, although much of the price increase is due to inflation. Overall, demand for short-term rentals along the coast is the highest while long-term properties are in lesser demand, usually catered towards university students in Zagreb or Split. Rental yields are fairly good in most regions, averaging 4.59% as of Q2 of 2023, and taxes are moderate with the real estate transfer tax even being lowered by a full percentage in 2017.

The majority of mortgage loans in 2017 had variable interest rates; however, many larger banks have recently started exclusively offering fixed interest rates. Smaller and medium-sized banks still tend to offer both variable and fixed-rate loans, but the general preference tends towards fixed rates now. Interest rates have been decreasing steadily since 2016. One very favorable condition is that, if you’re a tax resident of Croatia, the interest you pay on your loan is calculated into your annual tax refund and may be refunded. Property owners can also avoid capital gains tax as long as they keep the property for 3 years or more before selling. Additionally, Croatia joined the Euro area on January 1, 2023, meaning that the Croatian kuna has a fixed conversion rate with the euro. This will further help protect investors from swings in currency markets and foster market stability.

When it comes to location, there are many popular areas. Zagreb, the capital, is a bustling inland city. You can also choose from one of the many coastal cities in the Dalmatia region, such as Split, the Island of Hvar, and the Island of Brač, or the Istria region, such as Pula. For history and Game of Thrones lovers, you should consider the walled city of Dubrovnik, or for bargain-hunters, Osijek in the east has some of the lowest prices in the country. 

There’s plenty to take into account while searching for your dream residence or investment property in Croatia, but equally important are the details of financing your purchase. You’ll probably have to take out a mortgage loan, so let’s learn how to get a mortgage in Croatia as a foreigner, including lending conditions, requirements, and documentation.

Lending conditions

If you’re an EU citizen, you don’t have many more restrictions compared to Croatian citizens when it comes to taking out a mortgage loan for residential properties. Citizens of Norway, Iceland, Liechtenstein, and Switzerland also receive the same benefits as EU citizens.

Here are the general conditions that property buyers must meet:

• A loan-to-value (LTV) ratio of 70-80% (i.e. a 20-30% down payment).%.

  - Down payment could be up to 50% for foreigners.

• Buyers must pay off the mortgage in full by the time they are 60 years of age. 

  - If this is not the case, a lower loan amount may be offered or additional collateral may be required.

• Foreigners can buy residential and investment properties or land where they will build a residential property, but the property can only be rented out through a legal entity, such as a Croatian company.

If you’re a non-EU citizen:

• Your country of citizenship must have reciprocity with Croatia, allowing Croatians to purchase property in your country and vice versa. Find out if your country has reciprocity on the Ministry of Croatia’s real estate reciprocity page.

  - For the US and Canada, reciprocity agreements can vary by state or province of your last residence.

  - Some countries require that you have permanent residence, define the size of the property, and/or reside in the property.

• Banned from buying agricultural or forest land.*

• Must provide proof of long-term connection to Croatia, with permanent residence highly preferred.

• Must request consent from the Ministry of Justice (MoJ) to ensure you meet conditions (more on this below).

*All non-Croatian citizens (including EU citizens) are banned from purchasing agricultural land until June 23, 2023. 

Each bank may have its own specific conditions when it comes to mortgage loans, especially for foreigners. Generally, banks will be more likely to offer you a loan if you’ve been receiving regular income in a Croatian bank account for at least one year. Loans can be taken out in a foreign currency but must all be repaid in Croatian kuna in accordance with the Croatian National Bank (Hrvatska Narodna Banka). 

Interest rates in Croatia have been steadily decreasing since 2016. According to the European Mortgage Federation’s (EMF) 2023 country report for Croatia, annual average mortgage rates decreased from 2.7% to 2.5% between 2021 and 2022. Croatia is just one of a handful of European countries that saw average interest rates decline during 2022. Additionally, loan terms are typically 20-30 years in Croatia.

Unlike Spain, Greece, and some other European countries, residency by real estate investment is not included in the Croatian Golden Visa scheme. However, when you buy a property, you may be able to get temporary residence for up to 9 months a year, which you’ll have to apply for annually.

Requirements

In addition to meeting the lending criteria above, you’ll also have to get an individual tax number, open a bank account, draft an initial sales contract, and get permission from the Croatian Ministry of Justice. 

An OIB (Osobni Identifikacijski Broj) is the Croatian tax number required to pay fees and taxes associated with property purchases. Getting an OIB is pretty simple and doesn’t require any fees. If you’re applying in Croatia, you must visit a Tax Administration office, show your passport (or ID card for EU citizens), and fill out the OIB application. You can apply, get your OIB certified, and receive your OIB in just one or two days. If you’re not in-country, you can request an OIB online and upload your completed form (the website is in Croatian); however, the OIB must be certified in person at a later date.

You’ll also need to open a Croatian bank account in order to be approved by a lender for a mortgage. There are no restrictions when it comes to opening a bank account as a foreigner, but there are a few required documents. Many banks require that you make an in-person visit to open an account, but some may allow foreigners to apply and upload documents online. 

To open a bank account, you must have:

• An OIB (tax identification number)

• A passport, ID card (for EU citizens), or driver’s license

• A small deposit to activate the account - the amount depends on the bank

• May require proof of residency, depending on the type of account being opened. This is not required to open a non-resident bank account. 

While an initial sales contract between the buyer and seller isn’t always required, it will provide you with greater security. Just like a Sales & Purchase Agreement, this contract will define conditions and obligations, and legally solidify the intentions of the buyer and seller to move forward with the deal. Employing a lawyer to help draft the initial sales contract is best practice as it’s a legally binding contract. This contract also specifies the initial deposit amount (kapara) which is usually 10% of the purchase price. 

An initial sales contract is required if you are requesting approval from the Croatian Ministry of Justice (Ministarstvo pravosuđa). All non-EU citizens must be approved by the Ministry of Justice (MoJ) so that they can verify that specific criteria are met including country reciprocity and the property type. The procedure costs 35 kuna and is also required for property ownership registration later on. You should request approval as soon as you’ve signed an initial sales contract and made the deposit since the Ministry may take up to 60 days to review and make a final decision.

To request consent from the Ministry of Justice you must have:

• Proof of citizenship (e.g. notarized copy of passport) of the buyer and seller 

  - For US and Canadian citizens, proof of last address (e.g. notarized copy of driver’s license)

• Proof of seller’s property ownership via land registry certificate

• Initial sales contract - notarized copy 

• Certificate confirming the construction zone within which the property is located - this document is called Uvjerenje o namjeni

• If applicable: 

  - Croatian residence ID 

  - Power of attorney 

You can either send the documents in the mail or deliver them in person to the MoJ, located at: 
Ministarstvo pravosuđa Republike Hrvatske
Uprava za građansko, trgovačko i upravno pravo
Ulica grada Vukovara 49, 10000 Zagreb

If your request is denied by the MoJ, then you cannot legally purchase the property. In some cases, Croatian banks are unwilling to even consider a mortgage application until the borrower is approved. While you’re waiting for approval, you can work on preparing the necessary documents for your mortgage application. This may seem like a long and winding road filled with various requirements, but all of this is leading you closer to being a property owner in Croatia!
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Documentation

In addition to filling out the mortgage application from the bank, there are other documents you’ll need to submit to get approved for a loan. Keep in mind that these documents may need to be translated into Croatian and certified. 

General documents:

• Copy of passport 

• An OIB (tax identification number)

• Proof of marital status 

• Initial sales contract (notarized)

• Official estimated value of property 

• Original land registry excerpt 

Financial documents: 

• Proof of income 

  - Bank statements from the last 3 years

  - Proof of any additional income or assets (e.g. shares, investments)

  - If employed: letter of employment and proof of regular monthly salary (e.g. recent paystubs)

  - If self-employed: company ownership documents and tax reports from the last 3 years

• List of any existing debts (e.g. loans, overdrafts) 

• Croatian bank account details 

Once you submit these documents, the bank can then process your loan to determine if you will be approved for the loan or not. If approved, they’ll provide you with an offer which you have at least 7 days (on average 15 days) to review before making your decision.

To sum up

You’re now familiar with the Croatian real estate market, and the main conditions, requirements, and documentation you’ll need when applying for a mortgage from a Croatian lender. There may be a few more hoops to jump through when it comes to buying a property as a foreigner, but having a good understanding of the major steps will help the process go much more smoothly. If you’re not totally set on a location yet, you can learn about countries that have residency by investment programs or explore the mortgage process in Portugal, Spain, Italy, France, and Greece. 

Getting a mortgage from a Croatian bank isn’t your only option either. You should consider using an international mortgage broker like Kredium which offers personalized loans and specializes in helping foreigners get international mortgages and cross-border mortgages. With services in 60 countries worldwide, we can provide you with professional guidance through the entire mortgage process. Register on our website to get help today!
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Photo Credits: 

• Photo by Spencer Davis | Unsplash

• Photo by Dominik Lange | Unsplash