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News: Investors hungry for Hungary

Wed, 22 Aug 07

Overseas investors are increasingly finding it easy to do business in Hungary...

Financing is available for non-resident foreigners (mainly EU, US, Canadian, Japanese, Australian, and Israeli residents) at certain (not all) banks in Hungary.

Most of the time a regular mortgage contract is signed when the property is being bought and around 70% of the value comes from a financing bank at interest rates between 6-7%.

The loan may be in the local Hungarian forint currency, or euro, or Swiss francs (CHF), the latter being the most popular because of traditionally low interest rates. The Hungarian property as collateral is important as well as employment and tax documentation from the country of residence and employment.

Existing properties

There are also loans available for existing Hungarian property, which means the apartment can be used as equity while the money can be used to leverage further purchases or simply used for any other purpose.

In some cases no employment record is needed, only the property as collateral. In this case interest rates are higher and LTV is only 50%.

There is also the option of leasing the property from a bank, in which case the bank would be the owner but the investor reaps all the benefits of the property, meaning it can be rented, resold, and inherited. In this case, if the location is right, 100% LTV is also possible, and often no employment statements are necessary.

Purchasing through a Company

If a company wishes to purchase a property, project financing is possible.  In this case, a viable business plan must be presented to the bank, showing a secure income stream from the rental, and a serious business strategy for further growth and development.

The company must be in business for a while, preferably 2 years. In this case one can expect 50% LTV financing at competitive 6-7% rates.

After a period of massive buy-outs and mergers, competition between the banks is now strong enough for possible negotiation for better terms, especially if one buys several properties at once.

Do Not Sell, Re-finance!

Prices are surprisingly low in Hungary now, which makes it a great time to invest for the buy-to-let investor, as both rental yields and capital appreciation are promising. On the other hand, those who wish to flip their property quickly are up against a challenge.

The supply is large and the recent economic low has minimized the local purchasing power, so investors can easily shop around for bargains. For those who wish to sell their Budapest property, we highly recommend you re-finance instead, because:

1) You will gain the long-term benefit of capital appreciation in a historical city and;

2) You will be able to use your equity for re-investing elsewhere at a reasonable interest.

Representatives of BudapEstate Agency http://www.budapestate.com will be happy to assist you in financing your Hungarian property and recommending the right bank for your situation. 

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