We look beyond the purchase price

A car that seems affordable at first may be expensive to run and maintain.

To calculate its true cost, we consider:

• purchase price,
• financing cost,
• insurance,
• fuel or charging,
• maintenance and repairs,
• tyres,
• road tax,
• technical inspection (MOT),
• loss of value over time.

In Cyprus, renewing a vehicle’s road licence requires, where applicable, a valid roadworthiness certificate and the necessary insurance cover.

💰 New or used?

Before deciding, we carefully compare the advantages and disadvantages of each option.

New car: May offer:

• warranty,
• fewer immediate repairs,
• modern safety features,
• better efficiency.

But:

• higher price,
• faster depreciation in early years.

Used car: May offer:

• lower price,
• slower depreciation.

But requires:

• mechanical inspection,
• service history review,
• mileage verification,
• accident history check,
• estimation of repair costs.

🔍Before we buy: We do not rely only on appearance. An independent inspection can prevent future costs.

If we finance the purchase, we compare:

• interest rate,
• total repayment amount,
• fees and charges,
• down payment,
• monthly instalment,
• repayment duration,
• early repayment terms,
• any final balloon payments.

💡 A lower monthly payment does not always mean a cheaper loan. It may simply result from a longer repayment period and lead to a higher total cost.

⚠️ Warning sign:
If we need a very long financing period simply to make the monthly repayment affordable, the car may be more expensive than our budget can safely support.

We do not choose insurance based only on price.

We compare:

• coverage level,
• deductible,
• exclusions,
• theft or fire cover,
• roadside assistance,
• coverage for additional drivers,
• claims process.

The right cover depends, among other things, on the value and age of the car, how we use it and our family’s needs.

We do not wait for problems to appear.

We set aside a small monthly amount for:

• servicing,
• repairs,
• tyres,
• MOT,
• unexpected costs.

💡 A useful thought

The right car is not necessarily the most expensive one we can finance. It is the one that meets our actual needs without placing excessive limits on our other financial goals.

A long-term decision

For many of us, buying a home is one of our most important life goals. At the same time, it is one of the biggest financial commitments we will ever make.

Before deciding, we consider:

• does it fit our life plans?
• how stable is our income?
• how long do we plan to stay in the property?
• Do we have a sufficient deposit?
• Will we still have an emergency fund available?
• Can we also afford the maintenance costs?

So, we need to ask ourselves not only “Can I afford to buy it?”, but also“Can I comfortably afford to keep it for the years ahead?”

Good preparation can help us avoid unpleasant surprises and make a choice that supports our family’s life and goals.

Buying a home begins long before we sign the contract. It starts with building up our deposit.

Banks typically finance up to about80% of a property’s value.

This means we usually need:

• around20% deposit,
• plus additional purchase costs.

Example
Property: €200,000

• Possible Loan: approximately €160,000
• Own contribution: approximately €40,000

in addition, we need to budget for legal costs, fees and other charges associated with the purchase.

Saving early reduces the amount we need to borrow and gives us greater flexibility in our choices.

Before we start looking for a home, it is useful to seek mortgage pre-approval from one or more banks.

This helps us understand:

• how much we can borrow,
• likely monthly payments,
• whether we need a larger deposit,
• what to improve before applying.

This way, we avoid considering homes that are beyond our financial means.

The Central Bank of Cyprus has introduced certain measures that banks apply when granting new housing loans.

These measures are not designed to make things more difficult for homebuyers. Their purpose is to protect households from excessive borrowing and reduce the risk of serious repayment difficulties arising in the future.

💳 The bank does not look only at our income. Among other things, it considers:

• total income,
• existing loans,
• income stability,
• savings,
• ability to continue servicing the loan even if our financial circumstances change.

For this purpose, the bank also assesses our net disposable monthly income.

📌What is it?
It is the amount left each month after our usual and necessary household expenses have been deducted from our total monthly income. These expenses may include:

🍽️ food,
💡 utility bills,
🚗 transport,
👨‍👩‍👧 essential family expenses,
🛡️ insurance premiums,
🧾 other regular and necessary expenses.

Based on this amount, the bank assesses whether we can safely meet all our loan repayments.

Under the measures currently in place by the Central Bank of Cyprus, the total monthly loan repayments should, as a general rule, not exceed80% ofthis amount.

Example:

A household has a total net monthly income of €3,000. Its usual monthly expenses amount to €2,000.

Its net disposable monthly income is €1,000. Based on this amount, the total monthly repayments on all its loans should, as a general rule, not exceed approximately €800.

💡 Remember:

Approval does not mean affordability.

Every family has different needs and goals. It is better to choose a home that allows us to live comfortably, continue saving and cope with unexpected difficulties.

Not all mortgages are the same.

Before deciding, we compare:

• interest rate,
• loan duration,
• monthly payments,
• bank fees,
• early repayment conditions,
• flexibility.

📈 Fixed vs variable rate

Fixed interest rate
✔️ Our monthly repayment remains fixed for a specified period.

This provides greater predictability and makes it easier to manage our household budget.

Variable interest rate
✔️ It may be lower initially.

❗ However, our monthly repayment may increase or decrease depending on changes in interest rates.

Before choosing, we ask ourselves: Could we afford higher payments if rates increase?

Our mortgage repayment is only one part of the total cost.

Monthly cost includes:

• mortgage payment,
• insurance,
• maintenance,
• communal fees (if applicable),
• taxes.

Before making a commitment, we make sure that this total cost fits comfortably within our household budget and still allows us to continue saving towards our future goals.

In addition to the price of the property, there are other costs that we often underestimate.

Additional costs may include:

• legal fees,
• transfer fees,
• valuation costs,
• bank charges,
• insurance,
• agent fees.

Planning for these costs in advance helps us avoid unpleasant surprises.

Owning a home also means taking responsibility for the cost of wear and tear and repairs.

We prepare for:

• plumbing or electrical issues,
• maintenance,
• renovation,
• equipment replacement.

Rather than assuming that a particular percentage of a property’s value is suitable for every home, we estimate our maintenance needs based on:

• the age of the building,
• its condition,
• its size,
• the type of construction,
• repairs likely to be needed in the coming years.

We gradually build a separate maintenance fund so that an unexpected repair does not force us to take on new debt.

Before signing any document or paying a significant amount of money, we:

• seek independent legal advice,
• verify property title,
• check for debts or restrictions,
• review permits,
• inspect the property,
• fully understand the contract.

The Department of Lands and Surveys advises buyers to check, among other things, the title, encumbrances and restrictions, planning parameters, the possible application of VAT and transfer fees before buying a property. For contracts signed from 12 December 2023 onwards, an amended specific performance framework applies, aimed at strengthening buyer protection.

🚨 We do not rush decisions simply because of pressure“to act quickly”

The pressure of potentially missing out on a “unique opportunity” should not push us into making a rushed decision.

If we do not understand:

• the total cost,
• the terms of the loan,
• the legal status of the property,
• our future financial commitments,

we are not yet ready to commit.

💡 Tip:

Buying a home should not be based only on the amount a bank is willing to lend us, but primarily on the amount that allows us to maintain a comfortable standard of living, cope with unexpected expenses and continue saving towards our future goals.

Buying a home is not always the best choice for every family or at every stage of life.

Renting offers:

• flexibility,
• mobility,
• lower upfront cost.

Buying offers:

• stability,
• ownership,
• long-term value.

The right choice depends on our needs, how long we plan to stay, our income, our savings and our future plans.

💡 Key principle: We choose based on what we can affordwithout compromising:

• daily needs,
• emergency savings,
• long-term goals.

🚗 We consider the full cost—not just purchase price.
🔍 We check used vehicles carefully.
🏦 We compare total financing cost—not just instalments.
🔧 We plan for maintenance.
🏡 We evaluate whether buying fits our long-term plans.
💰 We save for deposits without exhausting our reserves.
📊 We assess affordability realistically.
📈 We consider interest rate risks.
🧾 We include all additional costs.
⚖️ We seek independent advice before committing.
🛟 We do not sacrifice our financial security to buy a more expensive car or a larger home.

👉What’s next...

Life is not only about major purchases.

It is also about celebrating meaningful moments.

From baptisms to graduations, family celebrations can bring joy, but also financial pressure if not planned carefully.

In the next article, we explore how to celebrate special moments without creating unnecessary financial burden.

🔗Useful links:

• 🏠Home Ownership: comparison between buying and renting
• 🏦Choosing the Right Type of Borrowing for Our Needs 
• 💳Borrowing & Managing Debt: responsible borrowing
• 🧮Financial Planning & Budgeting: integrating major purchases
• 🛟Emergency Fund: covering unexpected costs
• 🛡️Insurance: protecting family assets
• 🗺️Department of Lands and Surveys: property information and rights
• 🚘Road Transport Department: vehicle registration and inspections