Leasing is the new mortgage
The option of getting a house either as an investment or as a private residence, without having to resort to bank borrowing through leasing is now available in Greece.
This is thanks to a a regulation that went into force at the start of the year, and was designed to expand the options available for either the private or commercial exploitation of a property. Under the terms of the regulation, a party can also use the asset controlled through leasing in order to obtain liquidity and finance other needs or invest in another property. This option could go as far as substituting direct loans or the traditional form of property rentals, avoiding the risks such a form of house seeking entails.
Leasing is a widely used method abroad, not only for commercial purposes but also for individuals, and according to market professionals it is ideal for those lacking the necessary capital to buy their own house. Until recently the legislation allowed only the commercial use of that option, but this has no been extended, opening the way for leasing companies and banks to create special products for this particular market.
The mechanism is simple and allows any individual who has spotted a property and wishes to buy it, to address a leasing company that will effectively buy it on his or her behalf and then lease it back to them. Instead of facing mortgage payments to a bank, the client will pay rent to the leasing company for a specific period of time outlined in the relevant contract.
The property will then come to the client’s ownership once all leasing installments have been paid with a specific interest, which according to market experts will be close to that of a mortgage, i.e. near 3-4%, depending also on each client’s credit profile.
The greatest benefit of the leasing method in buying a house lies mainly the fact that the client can sidestep the obligation of having a significant chunk of the capital required for the purchase in order to have a mortgage issued. Nowadays one’s own capital must come to 30% or even 40% of the property’s value, in order to reduce the bank’s risk, while in leasing the companies maintain ownership until full repayment.