Buying a Home with a Loan: A Guide to Costs, Interest, and Taxes

Buying a home, apartment, or investment property requires careful planning, especially when financed through a loan. Given the high real estate prices and rising cost of living, more and more buyers are choosing a housing loan as a solution that allows investment without excessive upfront costs. However, the success of such a decision depends not only on the price of the property, but also on the financing conditions: interest rate, the choice between installments and annuities, and the tax obligations that accompany the purchase.

Loans and Interest Rates – How to Navigate the Sea of Offers

The loan market has become very dynamic in recent years. Although interest rates have fallen compared to the period two years ago, they still vary depending on the type of interest (fixed or variable), currency, and the length of repayment. Fixed interest offers buyers security because the installment does not change during the loan term, while variable can be more favorable at the beginning, but carries a risk if benchmark rates rise. The fixed interest option is most often more favorable in times when interest rates are low and financial markets are stable. On the other hand, a variable interest rate may initially be lower, but depends on the movement of benchmark interest rates such as Euribor. If Euribor rises, the installment amount will also increase. Therefore, buyers who choose a variable interest rate should have a reserve in their budget and monitor market trends. Before making a decision, it is useful to compare offers from several banks, not only the interest rate, but also additional costs such as fees, insurance, or property valuation. Buyers who want to compare which loans are available to them can do so via the website of the Croatian National Bank in order to get a real insight into future obligations.

Installment or Annuity: Which is More Cost-Effective?

One of the more frequent questions when taking out a loan is the difference between installments and annuities. With installment repayments, the principal and interest gradually decrease, so the first installments are larger and later smaller. With an annuity, the monthly obligation remains the same throughout the repayment period, but the ratio of interest and principal changes: initially you pay more interest, and only later more principal.
If the stability of the cost and the security of planning are important to you, the annuity is a simpler and more predictable solution. But if your income allows for larger initial payments, installments can be more cost-effective in the long run because you pay less interest in total.
To compare calculations and track costs, you can use the loan repayment calculator on Moj-bankar.hr, which clearly shows the difference between the repayment models.

Tax Obligations when Buying Real Estate

In addition to financing, it is important to know in advance all the tax obligations that come with buying real estate. In Croatia, real estate transfer tax is 3% and is paid when buying used real estate. For new construction, the tax is not mandatory because VAT of 25% is already included in the price. Buyers who are buying their first property can often obtain more favorable loan conditions, and in certain cases a refund of part of the VAT or incentives for young buyers, depending on the current measures of the Ministry of Physical Planning, Construction and State Assets. Read more about the conditions of buying real estate for those under 45 years of age on the pages of the Agency for Legal Transactions and Real Estate Brokerage. It is important to note that the cost of buying real estate does not only consist of the price of the apartment. There are also notary fees, property valuation, contract drafting, and registration of ownership. You can find more details about all taxes on the pages of the Tax Administration.


How to Wisely Choose a Financing Method

Buying real estate through a loan is not just a matter of choosing a bank, but also the right approach to planning. Before making a decision, it is important to carefully consider all the options and realistically assess your possibilities.
The best start is to compare offers from several banks, not only the interest rate, but also all the additional costs that can affect the final amount of the monthly obligation. Then it is worth calculating how much of the income goes to the loan installment and whether it leaves enough room for living expenses. Don't forget about additional expenses such as taxes, insurance, or furnishing the new home. If you are not sure how to fit everything into the budget, a conversation with a financial advisor or real estate expert can help you make a decision with more confidence.
A good plan and the correct choice of the repayment model in the long run mean more security and less stress whether you are buying your first apartment, investing in a new project, or looking for a luxury property by the sea.


If you are considering buying a property and want advice on the most favorable lending model, feel free to contact us. Our team of experts will help you find a property and a financial solution that best suits your goals.