Summary: It is very difficult for foreigners to get mortgages in Georgia. In those situations where it could be possible to get a mortgage, interest rates are very high compared to the rest of the world – in the region of 10% per annum.
At Tbilisi Property, we are often asked if it is possible for foreigners to get home loans in Georgia. Let’s start off with the first piece of bad news – interest rates.
Interest rates are very high in Georgia – somewhere in the region of 10% per annum. The best interest rate for a mortgage that we have seen is 7.5% per annum from Bank of Georgia, while the worst offer we have seen was 13% from TBC. And these are the interest rates for loans in USD. For loans in Georgian Lari, the rates are even higher – 1% higher in the case of VTB. These are not specially inflated ‘foreigner rates’ – Georgian citizens also have to pay the same rates. These high rates are part of the reason why rental yields are so high in Georgia. Many Georgians are simply unable to afford these high interest rates and so are only able to rent – even when rental yields are just below the interest rates.
Most investors who learn about the high interest rates realize that taking out a mortgage would mean that the majority of their rental revenues will go just towards paying off the interest. As a result, normally it would be better for them to buy a more affordable property that they can pay for without needing to take a loan. Some, however, accept the high interest rates and consider it worthwhile for their rental income to pay off their loans as they should still see capital gains as property prices in Georgia continue to increase.
But setting aside the issue of high interest rates, is it possible for foreigners to get loans at all?
Yes, it is theoretically possible for foreigners to get financing – a couple of our clients were able to obtain a mortgage.
One reason why banks are not too keen on lending to foreigners is that it is not nearly as easy for them to repossess the property in case the borrower defaults on the loan. Some banks will ask whether it would be possible for a Georgian citizen to act as guarantor for the loan. If you have any Georgian friends who are willing to act as guarantor, then it may ease the process.
The maximum Loan to Value offered by Georgian banks is usually 50% and the maximum duration of the loan would be five years. The bank will need to see some proof of your income before they are able to make an offer. Additionally, they will not offer loans on properties at an early stage of construction. They will only provide loans for properties that are either already complete or very close to completion. Certainly the apartment would need to have its Cadastrial Code already in place.
Additionally, it is not a five minute exercise to arrange a mortgage. Clients seeking a mortgage are often put into a ‘chicken and the egg’ situation when looking at property. The bank will only give a definite ‘yes’ or ‘no’ answer once they know exactly which apartment on which project the buyer is interested in, whereas the buyer finds it difficult to choose a property without knowing in advance whether or not they will be able to get the loan.
Once the bank has all of the details, it usually still takes them around two weeks to make a final decision as to whether they will grant the loan or not – meaning that most buyers will need to return to Tbilisi in order to sign off all of the paperwork, assuming the bank’s decision is positive.
Still interested in obtaining a mortgage despite the information above? Then please contact us and we can put you in touch with a banker at Bank of Georgia’s SOLO Club VIP division who can discuss possibilities with you in more detail.