Is buying a holiday home overseas with a 100% mortgage a wise move? The Greece example

For the majority of people looking for a holiday home abroad, a housing loan or mortgage that will provide them with 100% of the house value seems like a gift rather than an option. We are at a time where people receive offers of this kind via e mail.
However, it is a well known fact that the higher the mortgage you are looking for, the higher its cost is to you. Naturally, there are always positive options on offer in countries like Greece, one of the countries with a highly attractive real estate market. In this article we will examine Greece more carefully.
Within 2007 the interest rates on offer started from as low as 2,95%. Naturally, this was the base interest rate, not including house, life insurance or the legally required state contribution. A realistic expectation of an interest rate including these additions is between an average of 4% and 5%.
Fixed interest rates on offer start from 1 year and can reach even more than 20 years depending on the bank. Naturally opting for a fixed interest rate for more than 3 years usually guarantees that the interest rate will exceed 5%.
There is not really a minimum mortgage amount (i.e. some banks mention 3.000,00 euro as a starting point) while it is possible to obtain up to 90% or even 100% mortgage of the property value in some cases.
The repayment period for mortgages is up to 40 years, again depending on the bank, while one can repay it up to the age of 75. There are also financial institutions which offer the option of paying only the interest for the first two years of the mortgage. The installments of the housing loan are always paid after the money is released to the applicant. As in most countries, the banks based in Greece usually request for proof of income from the applicants which is usually supplied through their tax declaration documents.
The question remains: Should someone go for a 100% mortgage? First of all, the recent sub prime crisis in the United States of America (USA) apart from creating hundreds of thousands homeless until recently house owners, has also made banks around the world more careful with their housing loan options. Even in Greece articles in various newspapers such as "Kathimerini" or "Proto Thema" highlighted on Sunday 3rd of February 2008 the fact that Greek banks are going to increase the cost of mortgages and reduce the percentage they offer to cover. This implies that, 90% or 100% funding will soon seize to exist as an option while housing interest rates may soon rise.
As expected, Greek banks want to reduce their risk in this way but at the same time they protect the interested purchaser. Despite the protection of the consumer this is not banks top priority, which leads us to answer the initial question put forward in this article. Acquiring a housing loan will always be an option, but as a holiday, permanent or investment home seeker you can always keep in mind that there are two ways of reducing your risk:
Available funds enable you to acquire a smaller mortgage amount and thus pay less interest. Always set a realistic amount as your available budget without over stretching your self. At the same time it would be recommended that a minimum 15% deposit is secured before you commence your research in order to buy a home overseas.
Select a country and most importantly a location with a combination of what you are looking for and relatively low mortgage rates. Greece is the example that has been given so far and Crete could be a suggested location. A location is vital for the long term property value and in the island of Crete the real estate market has a relatively modest raise of 10% to 15% per year which makes it stand out when compared with the rest of Greece as a safe investment destination.
Taking these small steps may protect you while purchasing a property overseas and helping you to turn this process to a more enjoyable and safe experience.

Greece has become an increasingly attractive destination for people looking for a property overseas.

How prices of properties are rising in Greece
According to a 2007 study conducted by "A Place In the Sun" a specialist magazine, through exhibitions devoted to property seekers in Britain, Greece has acquired position No 7 in the top ten most popular countries for a British to purchase a home in the sun. Results of a survey published in January of 2008 in an article in the Greek newspaper "Kathimerini", showed that in Athens and Thessaloniki in the so called "premier areas" the value of properties have increased by 175% between December of 1998 and December of 2006. On average this rise in value equals to a 26% annual increase. At the same time in the less expensive areas, the value of properties has increased by 91% for the same period, which translates to an average percentage of 13% per annum. In other parts of Greece as in Crete, the annual rise of property prices is 10 to 15% despite the fact that on the island of Crete, developments emerge mostly in premier areas. The natural formation of this island offers a large number of plots in what is considered by locals and citizens of the world as premium locations. In the same article mentioned above "Kathimerini", writer Giannis Siotou mentions: According to the experts, renewing a property portofolio according to when it was built and to the current market trends i.e. emerging markets, can protect its value from time. A property is not like wine which gets better as time passes by. Despite regular maintenance its value shrinks as years pass by. However in the Greek property market there is limited experience of investments leading in damages. Two of the main factors that will help a property maintain its value even in times of crisis are highlighted in the above article but are also known to most property seekers these consist of: a) location and b) quality of construction. There are a number of developers who believe that in the wider Chania area in Crete there is now an emerging market where prime location is offered widely. Views of the sea and/or mountain peaks covered with snow are found in the majority of villages while access to sandy beaches is often a matter of a few minutes drive or walk. As a result the factor "location" is covered in the majority of cases. As far as quality of construction is concerned the competition in Chania and Crete is probably more intense when compared to the rest of Greece. The reason behind this is exactly the number of interested buyers attracted and the offer of options through various builders and developers. Naturally selecting a quality builder is vital and property seekers may always remember that people get what they pay for. In general quality and location exist and that is the reason why, while in most areas in Greece prices remain stable the prices in Crete are raising. However, the raise when compared to other areas in Greece or overseas is reasonable and that is a key factor that protects the market and the purchaser. A home seeker or an investor may not forget the importance of real estate companies. They are bound to be professional and guide people by offering them independent advice when conducting a research for them. This article has been written by Nektaria Kladitis, owner of Talos Properties, a real estate company based in Chania, Greece. www.talosproperties.com info@talosproperties.com