In short
- A bank lends up to 90% of the home's value, so you pay at least 10% yourself.
- Monthly payments on all your loans together may not exceed 40% of your net income.
- The rate is usually the bank margin plus 6-month Euribor, reviewed every six months.
- Get a bank's pre-approval before you buy, so you know your real budget.
What a mortgage is
A mortgage is a long-term loan used to buy a flat or a house. The home is the collateral: the bank registers a mortgage in the Land Register (Zemesgrāmata), and if the loan is not repaid, it has the right to sell the home.
In Latvia a mortgage can run for up to 30 years. The interest rate usually has two parts: the bank margin, which is fixed in the contract, and Euribor, which moves with the market.
How much you can borrow
Latvijas Banka sets limits that every bank has to follow:
- the loan may not exceed 90% of the home's value (95% with a state guarantee, such as the ALTUM guarantee);
- monthly payments on all your loans together may not exceed 40% of your net monthly income;
- the total of all your loans may not exceed six times your net annual income;
- the term may not be longer than 30 years.
A bank can be stricter than these limits, never looser. A worked example is in how much can I borrow.
Getting a mortgage step by step
- Work out your budget. Find out how much you can borrow and how much cash you have for the down payment and costs.
- Apply to several banks. Share your income details and get a pre-approval with an amount and a margin.
- Find a flat and agree on the price. People often sign a deposit (rokasnauda) agreement that depends on getting the loan.
- Property valuation. The bank orders a report from a certified valuer. If it comes in below the price, you cover the gap yourself.
- Contracts. You sign the purchase contract, the loan contract and the pledge contract. The bank usually also requires property insurance.
- Land Register and payout. Once your ownership and the mortgage are registered in the Land Register, the bank pays the seller.
Costs on top of the down payment
The down payment is not the only cash you need up front. Plan for these costs:
| Cost | Amount |
|---|---|
| State fee (valsts nodeva) for registering ownership | 1.5% of the value |
| State fee for registering the mortgage | 0.1% of the loan amount |
| Property valuation for the bank | Set by the valuer's price list |
| Bank arrangement fee | Depends on the bank, often negotiable |
| Property insurance | Paid every year, depends on the insurer |
What it costs each month
An example: a €100,000 loan over 30 years at a total rate of 4% a year costs €477 a month. At 5%, the payment is €537. These figures only illustrate the maths.
How to work out the payment for your own loan amount, rate and term is covered in the article on the monthly mortgage payment.
Common questions
How long does it take to get a mortgage in Latvia?
A pre-approval often comes within a few days. The whole process to payout usually takes a few weeks, because of the valuation and the Land Register entry.
Can I get a mortgage with no down payment?
No. The law allows lending up to 90% of the value, or 95% with a state guarantee. So you cover at least 5-10% yourself.
What is the longest mortgage term?
Latvijas Banka caps housing loans at 30 years.
Can I repay the mortgage early?
Yes, in full or in part. Ask your bank about the conditions and any fee.
Sources
- Borrower-based measures · Latvijas Banka
- Noteikumi par valsts nodevu par īpašuma tiesību un ķīlas tiesību nostiprināšanu zemesgrāmatā · Likumi.lv
- Noteikumi par patērētāja kreditēšanu · Likumi.lv
This article is for information only and is not legal, financial or tax advice. It may contain mistakes or be out of date, so check it against official sources or with a specialist before you decide. m²cena accepts no liability for any loss or damage arising from the use of the information in this article.