A mortgage is a long-term financial commitment that typically spans 20–30 years. Understanding all the terms before signing is critical. In this article, we cover the key things you need to know about mortgages in Lithuania.
What is EURIBOR and why does it matter?
EURIBOR (Euro Interbank Offered Rate) is the interest rate at which European banks lend to each other. In Lithuania, most mortgages are linked to the 6-month EURIBOR. This means your interest rate changes every 6 months based on EURIBOR movements.
For example, if your mortgage rate consists of EURIBOR + a 2.0 % margin, and EURIBOR is 3.5 %, your total rate would be 5.5 %. When EURIBOR falls, your monthly payment decreases. Use our mortgage calculator to see how EURIBOR changes affect your payments.
Fixed or variable rate?
Lithuanian banks offer two main rate types. Variable rates consist of EURIBOR plus the bank margin. They can change every 3 or 6 months. The advantage is that they are often lower initially than fixed rates. The downside is uncertainty, as EURIBOR can rise.
Fixed rates remain unchanged for a set period — usually 3–5 years, sometimes up to 10 years. After the fixed period ends, the rate becomes variable. Fixed rates provide stability and predictability but are typically higher initially than variable rates.
How to decide? If you plan to stay in the same apartment long-term and value stability, choose fixed. If you expect rates to decline soon, variable may be more advantageous.
DSTI ratio — how much can you borrow?
DSTI (Debt Service To Income) indicates what share of your monthly income goes toward loan repayments. The Bank of Lithuania regulates that DSTI should not exceed 40 % of disposable income. This means if your net monthly income is 2,000 euros, all loan payments combined cannot exceed 800 euros per month.
Importantly, DSTI is calculated not at current rates but at a stress-tested rate, which is higher. This protects borrowers from scenarios where rates rise and payments become unmanageable.
Down payment
In Lithuania, the minimum down payment is 15 % of the property value. However, a larger down payment — 20 % or more — secures better loan terms: a lower margin and smaller monthly payments. Some banks also offer preferential conditions for clients who hold savings or investments at the same bank.
Additional costs
Beyond the loan payment, account for these expenses: property valuation fee (150–300 euros), loan agreement fee (0.2–0.5 % of the loan amount), property insurance (mandatory, around 100–200 euros/year), and life insurance (often required by the bank). These costs can add 1,000–2,000 euros annually.
How to compare bank offers?
When comparing offers, look beyond the interest rate to the total cost of the loan (APR — Annual Percentage Rate). This figure includes all associated costs and allows for an objective comparison. Also pay attention to early repayment terms and penalties.
Mortgage refinancing
If market conditions change or your financial situation improves, you can transfer your mortgage to another bank with better terms. Refinancing makes sense when the difference between current and new terms is at least 0.3–0.5 percentage points. Factor in refinancing costs: new valuation, notary, and agreement fees.
Tips before taking a mortgage
- Collect offers from at least 3 banks and compare
- Calculate not just current payments but potential future payments with a higher EURIBOR
- Maintain a financial buffer — do not plan for your entire salary to go toward the mortgage
- Consider a fixed-rate period if EURIBOR is low
- Check your credit history before approaching banks
Use the BustoRadar mortgage calculator to model different scenarios and find the optimal loan option for your situation.