On All Fools’ Day, i.e. on 1 April, new rules for granting mortgages were introduced. These new rules apply to banks as well as to clients who finance their property purchase by a mortgage loan. What certainly remains true is the fact that a mortgage is a “healthy loan,” which is not intended for short-term consumption but for purchasing a house, which might become family heritage one day.
It is definitely good to know that financing a purchase only by a mortgage loan is not the best solution and that the rule that says “with none of your own money no mortgage is funny” is always true. From April it is necessary to have more savings or to have an opportunity to provide the bank with other security, preferably another property that belongs to you or a relative. In most banks you will get a lower interest rate if the mortgageable value of the property is under 80% of the value of the mortgaged property. If this percentage is exceeded, you will pay more.
The new rules have made the mortgage market clearer but there are still differences among the products offered by banks. For example, income from business, income from lease and wage-earning income are taken into account differently by each bank, which is why you will always get several solutions from us. Some banks have special rules for selected employers and in many cases it is easier to get a mortgage at the employer’s “home bank.”
The new rules have also been created so as to set clear limits for early repayment of mortgages and also for such cases when the property is being sold. With the new loans it is possible to repay up to 25% of the original mortgage amount without a fee after a year of repaying and so decrease the financial burden or reduce the loan repayment time. In the event of selling the property a maximum penalty of CZK 50,000 is set – but only if the property is really sold, not in the case of financial settlement during a divorce.
If you are intending to buy a property and are considering taking out a mortgage, don’t forget the tax advantages that you can use. Make sure you consult us or a tax adviser so that you know certainly that you can apply the deduction of mortgage interests. That is one of the features that makes property purchase an interesting investment.