"Already paid 30 thousand for rent." A programmer calculated everything and took out a mortgage in Vilnius
An IT specialist from Belarus has been living in Lithuania for over five years, and one day he got tired of renting an apartment. Here is the story of another mortgage (with a permanent residence permit) — with useful details, writes Devby.io.
— I decided that mortgage payments made more sense to me than monthly rent payments to a landlord. And I started exploring the option of buying an apartment.
I handled the search and information gathering myself, without agents or other assistants. The main website for finding housing in Lithuania is aruodas.lt; all locals use it, the information there is up-to-date, and I didn't notice any fraud.
Apartments in Lithuania can be sold without land (on a leased municipal plot) or with a share of the land on which the house stands. The latter method often applies to new constructions built on repurchased land, and for foreigners from third countries, a transaction with such a property is problematic because they cannot own land in Lithuania.
What I bought
I deliberately avoided "apartments with land," so I chose a three-room apartment in a renovated Soviet-era building located on municipal land.
Why a three-room apartment? Well, because I can afford it. Why not a new building? Because the prices there are completely different + the obstacle of land ownership.
This is an apartment in a decent neighborhood, with renovations – not super modern, but at a "move in tomorrow and live" level. In the future, modern electrical wiring will need to be installed.
The price was about 160 thousand euros. I tried to negotiate with the owner – I managed to get a couple of thousand off.
I probably could have negotiated more, but I wanted to finalize it quickly. Spoiler: the process still stretched out to three months.
Over the years of living in Lithuania, I saved money for the down payment; for the rest, I needed a mortgage. I'll describe the stages of the mortgage process based on my experience.
You can start writing to banks even before you find a home – just to clarify if they will grant you a loan in principle and what amount you can expect.
That's what I did. I wrote to several immediately: Swedbank, Seb, and Luminor. All replied that they agreed, but to clarify the terms, I needed to choose a property and send its appraisal.
The banks also inquired about the origin of the funds. The main part of my savings is my Lithuanian salary, so everything is transparent here, but for the 1000 euros I once deposited in cash, they asked for a separate report. Thanks to my old employer in Belarus – they sent me an income statement for my last year of work, which was sufficient.
Apartment Appraisal
After choosing an apartment, I signed a preliminary agreement with the owner (I had to leave a small deposit) and ordered an appraisal of the property's value (300 euros). This is a mandatory condition for a mortgage: on the banks' websites, there is a list of appraisers with whom a specific bank works. You can choose one that partners with several banks at once, then one appraisal can be duplicated for all of them.
An important point: whether the house was renovated affects not only the appraisal and utility payments (which can differ several times), but also the banks' offers. The higher the energy efficiency of the house, the more favorable the terms.
Loan Offer
When the appraisal is ready, you can submit a full application to the bank — in response, they will make you a loan offer taking into account the type and value of the specific property. All the loans offered to me were annuity loans.
An annuity loan is a loan repayment scheme where the borrower repays the debt in equal installments at regular intervals. The total amount remains fixed, but within it, the distribution of the principal debt and interest changes. Initially, a larger part of the payment goes towards interest repayment.
The maximum term varied from 20 to 30 years. Banks immediately made two offers: with a fixed rate and a floating rate (EURIBOR + bank margin). The terms at Seb and Luminor were better than at Swedbank. The difference in margin between the best and worst offer was 0.6 percentage points.
EURIBOR (Euro Interbank Offered Rate) — this is the averaged interest rate at which European banks provide unsecured loans on the interbank market. Currently, the 12-month EURIBOR rate is 2.755%.
Down payment. The banks I contacted required between 15% and 30% of the apartment's value. But this was preliminary. When I submitted the apartment appraisal, the bank with a minimum threshold of 15% slightly increased it for me, while the bank with a 30% threshold, conversely, offered to lower it.
You can negotiate the margin and the down payment with the bank, especially if you have several offers and can use them as arguments.
I tried to lower the margin, but I didn't succeed. It remained at 1.5%.
The total annual rate at which I repay the loan (EURIBOR + 1.5%) is slightly more than 4%.
Deal at the Notary
After the bank finally approves the loan, you go with the seller to the notary and pay your part (by transfer, of course). You and the seller split the notary's fees (but this must be stipulated in the preliminary agreement), plus you cover the expenses for re-registering the apartment (the notary submits the documents themselves). These services cost me 300 euros.
Insurance and Mortgage Agreement with the Bank
After the apartment is registered in your name, you need to insure it. The cheapest insurance costs about 100 euros per year.
Now you write to the bank again, the bank contacts the notary, concludes a mortgage agreement with you, and transfers the remaining part of the sum to the seller.
Theory vs. Practice
Initially, this process was more or less clear to me. Nevertheless, it took much longer than it seemed at first.
From the preliminary application to the bank to the final settlement with the seller, about three months passed.
Why so long? Because the bank spends one to two weeks on each approval stage. For example, I submitted the apartment appraisal to the bank, and a few days later they sent me a mortgage offer. I replied that I agreed. They told me that now the loan needed to be approved, which would take 5-10 business days. A week later, they wrote: the loan has been approved, now I need to open an account from which I will pay the mortgage, after which the bank will send me documents for signature. Then it turns out that, since I am not an EU citizen, opening an account requires another check lasting "from 10 business days or longer." And then the manager handling my mortgage went on a two-week vacation.
So, it's better to allow extra time for bureaucracy in advance.
Economics of Buying
My monthly mortgage payment is now 580 euros. Okay, add a small amount for insurance and account maintenance, let's say 600 euros + utilities.
Renting a similar three-room apartment in a similar neighborhood (Karoliniškės, Tuskulėnai, Šeškinė, etc.) costs 700-800 euros + utilities.
It turns out I'm paying even less than for rent, and these are not irreversible losses; every month I'm buying my apartment piece by piece. If necessary, it can be sold, even with an outstanding mortgage (though that's more complicated).
The loan is for 30 years. But I can pay it off early without penalty.
Plans for the Future
They are, like for many, hazy. For now, I am forced to live in Lithuania. Citizenship is still a long way off, so for now, I will keep paying the mortgage.
How confident am I in my employer? Like everyone else: I understand that I could be laid off, and finding another job would not be easy.
How confident am I that Lithuania will remain a safe place? I am not confident.
But what does that change? I still need somewhere to live. I'll have to find 500-700 euros to pay for housing anyway. With an apartment I own, it's even simpler.
If I get squeezed financially, I can rent it out and move, say, to a one-room apartment in a worse neighborhood. That would create a passive income stream.
And anyway, I've seen all sorts of crap in life. I prefer to solve problems as they arise. In the time I've lived in Lithuania, I've already paid about 30 thousand euros for rent. I could spend a couple more years thinking about how to live next, and pay another 10-15 thousand.
An apartment, even if mortgaged, is still an asset. Even if I leave, it can be rented out. Or sold, perhaps at a discount, but at least some of the funds can be recouped. If I continue to live in rented housing, nothing can be recovered. So, it's not a choice between "in five years I have a mortgage around my neck or cash in my pocket," it's a choice between "a illiquid asset owned or nothing."