Thousands of Estia Scheme applications are ready to be submitted by home owners who are not able to pay their monthly instalments. Under the Scheme, set to be implemented next month, the state will partly subsidise monthly instalments.
Finance Minister Harris Georgiades yesterday said the implementation date will be honoured and that credit institutions have already made significant preparations with clients so that everything goes according to plan.
The scheme will benefit not only financially shaky customers but also the banks whose balance sheets will now record fewer non-performing loans.
Bank of Cyprus has some 3,000 clients with total outstanding loans estimated to be around €900 million ready to join Estia scheme. What’s positive is that 98% of Bank of Cyprus clients covered by the scheme have already responded. The remaining 2% have either sold the house or handed it over to the bank in a debt to property swap.
As for Hellenic Bank, it has sent around 1,050 applications for loans worth a total of some €250 million. The lender noted that the most important aspect of the scheme is that people have come forward themselves to discuss how to solve their financial problems – something that was not the case in the past.
KEDIPES (former co-op bank) estimates that their loans to come under Estia amount to approximately €1 billion. Estia scheme also includes Astrobank and Alpha Bank, but other smaller banks are excluded.
Bank of Cyprus gave examples of applicants eligible for Estia including a borrower who is about 45 years old and his loan balance now stands at €450,000. The estimated value of his mortgaged house stands at €300,000. With the existing loan terms, the current instalment is €1,947 payable up until the borrower turns 70, that is, for another 25 years (300 months). After joining Estia, this borrower’s new loan will amount to €300,000.
The remaining €150,000 is considered a “dormant loan” and will be written off if the borrower pays his instalments promptly and in accordance with Estia’s terms. This borrower’s instalment will be €1,298 for which the state’s subsidy will be €433.
The net cost to the borrower is €865. The instalment is paid up until the borrower turns 70. Bank of Cyprus has a number of cases where borrowers are already 60 years old and have non-performing loans.