Mortgages in Estonia

Typically, a mortgage in Estonia will have an interest rate of about 4.5% upwards and providers are happy to lend for both residential and property investment purposes. The minimum loan value for most mortgage providers is 10,000 Euros and most require a 20% deposit. The average term for an Estonian mortgage is 30 years. Most Estonian mortgage providers will also look at the income of the property investor and the cost of the mortgage plus outgoings must not exceed the investor’s income.

The Estonian Property Buying Process

There are two major contracts which are involved in the sale and purchase of any Estonian property, and both will be prepared by a notary.

The initial agreement is the sales-purchase agreement and this is executed by both the property vendor and purchaser as soon as the seller has received an offer for their property which they are happy to accept. The property purchaser will then look to get financing for their Estonian property whilst also paying the state fee to the government – this is 0.4% of the purchase price.

The transfer of ownership is then executed by both parties and an application will be made to the Estonian Land Registry Office to transfer the property across. A public notice of the change in ownership is then published in the Estonian Official State Gazette.

Read our free guide to the best places to buy in Estonia.

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However over the past decade or so, Estonia has gained it’s independence, the government has started to liberalize laws regarding foreign property ownership, and the Estonian Tourist Board is working hard to promote the country around the world. All this means that Estonia is starting to become one of the most hotly tipped places in Eastern Europe to buy.

Buying a Property in Estonia
The process of buying real estate and property in Estonia may look daunting at first glance but the Estonia government has been working hard to make life easier for foreign nationals attempting to buy property in the country.

There are two main contracts that are required in Estonia property sales and both documents should be prepared by an authorised notary. In Estonia, it is compulsory that a notary is involved in real estate sales. If you would prefer not to have a notary prepare the contracts, it is possible for someone else to draft them however a notary is required to review them in detail to ensure that everything meets the requirements of Estonian law and that they accurately reflect the property transaction.

The first agreement that will be prepared is the sales-purchase agreement. This will be drawn up once the buyer has made an offer on the property for sale and the vendor accepts the price. Usually, it takes between two to four weeks for the sales-purchase agreement to be drawn up.

Once the seller has accepted an offer on the property, the buyer is usually expected to find financing for their property deal. The buyer must also now pay a state fee to the Estonian government – this is 0.4 percent of the value of the real estate they are buying. Mortgages can be obtained by foreign investors in Estonia for both residential and investment properties. The rates will typically start from around 4.5 percent, although this will vary accordingly. Generally speaking, the maximum mortgage loan you will be able to get is 80 percent of the property value. The standard mortgage term is around 30 years.

The final agreement will now be drawn up for the property. This is basically a transfer of ownership document. Once both parties have signed the document, an application will be made to the Land Register Office to transfer the ownership of the property from the vendor to the buyer. A public notice of the change will then be published in the Official State Gazette.

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Estonia is rapidly becoming one of the countries of choice for Eastern European foreign property investors – with it’s strong economy, shortage of new property, an up-to-date computerised land registry system, low taxation levels and low levels of corruption, it is no surprise that real estate investors are looking on Estonia favourably.

With Tallinn’s Old Medieval Town included in the World Heritage List as one of the best medieval town centres in Europe, and also having been chosen as the European Capital of Culture for 2011, tourist numbers are expected to increase significantly over the next few years. Naturally, any boost in tourist numbers will be good news for property investors – rental yields in popular areas are expected to be buoyant and, combined with a shortage of good properties, property prices are expected to grow.

The Estonian Government also has a good, open attitude towards foreign property investors and this attitude helps in sales and therefore property prices. Foreign investors are currently free to buy and sell residential properties as they wish.

For those looking to buy, a buy-to-let property in the capital city Tallinn starts from around $100,000 however as the Tourist Board are keen to promote other areas of the country, now is a good time to source some cheap property in up-and-coming areas – Estonia has plenty of potential tourist traps including Lahemaa National Park, beaches, fishing villages and castles, so there are plenty of places to choose from. The island of Hiiumaa houses a number of eminent politicians and businessmen and is worth investigating.

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