New Rules for Mortgages
On All Fools’ Day, i.e. on 1 April, new rules for granting mortgages were introduced.
Basic information about how to take out a mortgage on a property in Prague. Types of clients, requirements that the client needs to meet, most common Loan to Value ratio, average interest rates and what documents have to be submitted in order to apply for a mortgage. For any questions you can visit our FAQ about mortgages or contact us us at:
For information about the mortgage and financal services we offer please visit our Mortgages and Financial services page.
If you are a foreigner planning to take out a mortgage on a property in the Czech Republic, you should know there is a different set of rules applying for each category of clients:
Mortgages for EU citizens are possible in similar conditions as for Czech citizens. Slovakian citizens specifically have a high chance of obtaining a mortgage, especially if their income is generated from the Czech Republic.
To obtain a mortgage, there are no clear rules that the client must meet. The client is always judged individually depending on several factors. There is no rule that the client must have a permanent residency or a temporary stay in the Czech Republic, although this is an advantage. If you only have a long-term residency in the Czech Republic it is still possible to obtain a mortgage. However, the bank will only lend you up to a certain LTV.
As previously mentioned, there are several factors that will determine whether you are an adequate client. Among these factors are:
Country of origin
Origin of income
Types of residency in the Czech Republic
Amount of revenue
The LTV (Loan to Value) is a very important factor when applying for a mortgage. It is the ratio of the mortgage loan versus the appraised value of the specific property. In general, banks in the Czech Republic lend up to a maximum of 85% LTV. It is possible that the bank can value a property at a lower price than it is, which results in more funding from your own pocket. Therefore, it is advised to have at least 20–30% of the real estate price of the property prepared.
A foreigner can still ask for a 90% LTV or higher, but then being a resident of the Czech Republic is mandatory. For non-residents from non-risky countries the maximum LTV is 85% for residential mortgages (buying a property for living) and 60% for investor’s mortgages (buying a property for investment).
As for interest rates, you can choose between an ARM (adjustable rate mortgage) or a FRM (fixed rate mortgage) which is usually for 1, 3, 5, 7, 8 or 10 years. The lowest rate is usually for a 3-year or 5-year fixation period. Both short and long fixation periods have their advantages and disadvantages and it depends on the client, what they prefer. While a shorter fixation period can assure you more flexibility, the longer one assures the same monthly payment. Furthermore, the majority of banks offer lower interest rates when the LTV is at or below 80%. As the LTV ratio increases, so does the total cost of the loan.
For example: A client with a LTV of 95% has an interest rate that is 1,10% higher than a client with an LTV of 80%.
The maximum age of the borrower can differ, but is usually 65–75 years, with the maturity date between (1–30 years).
To ensure credibility of their clients, banks will usually ask for the following documents:
Form with personal information
Income declaration and tax declaration
Below is a more detailed list of the specific documents:
1. ID documents (In the case of foreigners, the document is a passport.)
2. Income declaration
3. Proof of expenditure
4. Documents when purchasing the property
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