Understanding the Serbian Financing System

Panorama shot of Properties in belgradeAs a UK citizen hoping to buy a property in Serbia, is it important to know what to expect when financing your purchase. Under the reciprocity agreements, it is perfectly legal for someone from Great Britain to purchase a home in Serbia, and it is also possible to obtain a mortgage to cover the costs. While the process of obtaining a mortgage for an investment property within the UK is fairly straightforward, it makes sense to seek professional guidance when looking for a mortgage to buy a home in Serbia. A mortgage broker with experience in the overseas market would be the best source of UK property financing advice about how to apply and be accepted for a Serbian home loan as they have a specialist knowledge in the field and can point applicants in the right direction. They can also steer purchasers down the path towards successful completion of their property purchase in a country with unfamiliar processes.

A street in SerbiaUsually, the maximum loan to value amount permitted in Serbia is 90%, but the bank in any case will require certain proofs of net monthly earnings in order to prove the ability to make the expected repayment amounts. A Serbian version of mortgage indemnity insurance is also required to be paid, known as NKOSK cover. This type of premium is now uncommon in the UK, although it was popular in the past, and is now generally only found on UK mortgages of more than 90% loan to value. Its purpose is to protect the lender in the event of the borrower being unable to afford their repayments.

Luckily, the home buying process in Serbia is not as complex as might be expected, and may even be quicker than in the UK. While in the UK it generally takes between 2 and 3 months to complete a sale, in Serbia the process can take as little as 3 days, and rarely more than six weeks.

A huge buildingOnce a property has been selected, the purchaser simply makes an offer, and on its acceptance signs a notarised preliminary agreement together with putting down a deposit of between 10 and 15% of the home’s total value. Once this has been done, the deposit is generally lost if the purchaser backs out of the agreement, and therefore problems such as gazumping or the seller withdrawing the property from the market which can cause stress and delays in the UK property market are eliminated.

The buyer’s solicitor will check the paperwork to ensure that the title deeds are in order which is even more important in Serbia than in the UK as there is a danger that the property may not actually belong to the named seller. Once the paperwork has been approved, any amended details will be added to the contract and the finalised agreement will be certified in the presence of the notary, making the buyer the legal owner.

It is only at this point that the property’s value is assessed by the Inland Revenue Office and the required amount of property tax must be paid. Once the agreed price has been paid, the buying process is complete, although a 6 step property registration process must be completed which takes 91 days to completely finish the procedure.

Know your Taxes!

Hostels-in-belgradeAnyone wishing to buy a property in Serbia must first check that their country has a reciprocal agreement pertaining to home ownership. As the UK allows Serbian citizens to own property within Great Britain, UK citizens are also permitted to buy a home in Serbia.

Purchasers can either be a cash buyer or can apply for a Serbian mortgage, although professional assistance from an international mortgage broker would be wise in this eventuality in order to navigate the complex international property laws.

When buying property in Serbia, it is important to take into account the taxes and extra costs that must be paid on top of the agreed purchase price. Apart from the 5% property tax which must be paid on the estimated value of the property to enable registration with the Area Property Registry, there is also a transfer tax at a rate of 2.5% on some properties, (although each member of the household is entitled to 15 sq m per person tax free and the first apartment of under 40 sq m purchased is also Transfer Tax free). Buyers in Serbia are also required to pay an estate agent’s fee, unlike in the UK, usually at around 3% of the purchase price, as well as a registration fee and a court fee.