Czech Mortgage Guide
Want to buy a house in the Czech Republic? Here's a quick introduction to the various options available
Getting a mortgage as a foreigner in the Czech Republic is possible, although the procedure can be time consuming. However, it can be demanding for Czechs too. The process recently has become much easier for EU citizens.
One of the first things you have to consider is your status as a foreigner in the Czech Republic. The process of obtaining a mortgage is much easier for EU citizens now that the Czech Republic is a member of the EU. Before 1 May 2004, if you were an EU citizen and you wanted to buy property you had to have 10-year permanent residence (trvalý pobyt), or you could purchase it through a company. Now, you can buy property whether you have temporary residence (přechodný pobyt) or permanent residence, although some banks require permanent residence status. Non-EU citizens without permanent residence will still have to consider buying property through a company, although a fast-track solution is to buy an “off-the-shelf“ company from a firm which specialises in such transactions. The process costs around CZK 40,000, but it means that you can avoid the usually time-consuming process of setting up a company. From the very outset you should think about consulting a mortgage adviser who can help you negotiate your way around the mortgage maze. S/he will be able to advise you about the various benefits and disadvantages of each lender’s offer, specific details that should be considered and all the legal procedures that have to be followed. The mortgage broker is also a local who will know the market and so s/he can help you find the property that is best for you and at the best price. Banks such as Česká spořitelna offer special expat packages, including mortgage services. This may also be an option, although an independent mortgage adviser will be able to give you an overall, impartial view of the market.
How mortgages are offered
First of all, you should work out what you are looking for and then you should approach a lender about arranging finance. The lender (most commonly a bank), will not provide finance until you have found a property. Banks are the most common lenders in the Czech Republic, and it pays to look around to find the best deal. Obviously having a mortgage advisor to help you is extremely advantageous. Whether the bank will offer you a mortgage will depend on your income, and the lender will ask to see evidence of your income, such as pay slips, and income from any other source. The way the bank calculates how large a loan you can afford is complicated, but as a rule, the monthly payment with interest should take up no more than 50% of your net monthly income, which can be as an employee or from freelance work, although in the latter case you will have to prove that you have a stable income. Remember that banks in some cases will offer a loan based on their own evaluation of the property, rather than the purchase price, especially for older properties. You will need to put down a deposit, which is normally 10%-20% of the property price. Banks sometimes offer a 100% loan, although this may be 100% of the valued price based on their own evaluation. Lenders offer various maturities for mortgages, such as 5 years or 30 years (the maximum), with 65 years being the age limit at which banks will lend money. Mortgages can be offered at a fix rate for a certain period, or variable rates. There is a trade off between higher interest rates offered with fixed rates, or lower interest rates with variable payment periods. Some banks, but not all, require life assurance to be set up for them to grant the mortgage. Beware of the banks that try to sell you life assurance since they may not be offering the most competitive rates. You can always set up your life assurance independently and if necessary assign the policy to the bank should they require it.
Video on YouTube
What’s driving the property boom? by Nathan Brown - Czech Point 101
The current mentality regarding real estate similar to someone looking for a new car
Private apartment rather than a hotel - different tourist experience by Flat in Prague
FLAT IN PRAGUE is offering an attractive alternative to hotel stays
In a hotel like a tourist or like a local in a private apartment? by Prague.TV
FLAT IN PRAGUE is offering an attractive alternative to hotel stays!
Nový Žižkov Project by Nový Žižkov Project
A modern urban area surrounded by greenery
Purchasing your own home in the Czech Republic by FINEP
Czech Republic is an ideal country for both investing and living
Tips for renting and buying apartments by Home Sweet Home
What to expect and what to avoid when looking for an aparatment
Czech Property Forecast for 2014 by Nathan Brown
A look back at our 2013 property forecast
Major Legislative Changes Regarding Real Estate in the Czech Republic Introduced by the New Czech Civil Code by Rutland Ježek
A complex recodification of Czech private law will become effective in 2014
President to look for a new office by Nathan Brown
Campaign aims to draw attention towards the corrupt business practices of Czech politicians
The real estate sales in the Czech Republic are speeding up by Residence Visage
Home Staging helps real estate owners prepare their property for sale
Seasonal Ski Rental with 15% discount!
Personal Assistant who SAVES YOUR TIME and NERVES. Just ask...
Feel the rhythm and party to the biggest hits of the 80’s!
Looking for a memorable experience in Prague?
Homemade traditional British Pies in Prague
Home of the hottest tastiest chilli sauces in Prague
Hungarian Fast Food in Prague
Delivering on our promises through medical innovation