New Rules for Mortgages
On All Fools’ Day, i.e. on 1 April, new rules for granting mortgages were introduced.
Yes, however the requirements for foreigners are very specific. Foreigners are distinguished into two different categories: EU residents and Non-EU residents. Requirements for these two categories differ immensely. In addition, most banks demand an income from the Czech Republic and a permanent residency. For more information about mortgages visit our article about Mortgages and Financing in Prague.
It is very important to listen carefully at your first bank meeting to know whether the bank wants an original, certified copy or just a regular copy of the needed documents. Below is a list of documents, that your bank will most likely ask for:
For a more detailed overview of needed documents you can visit our article Mortgages and Financing in Prague. The process of obtaining a mortgage can be very difficult especially when applying for one in a foreign country which is why we advise to use the services of a financial advisor who will emphasize the client’s needs, represent their client in all important decisions and help them get the best mortgage value possible. Please contact us if you have any further questions regarding mortgages.
There are several factors, which affect the final interest rate such as: loan maturity date, loan amount, deposit amount, level of income, etc. In the case of a FRM (fixed rate mortgage) which can be for 1, 3, 5, 7, 8, 10 years and more, the lowest interest 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.
Unfortunately for foreigners, obtaining a mortgage without any down payment is not possible. In general, banks in the Czech Republic lend up to a maximum of 85% LTV. However, 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.
At the moment, Czech Republic has an average interest rate of roughly 2,02%. Although neighbouring countries have interest rates such as 1,07%, 1,19% and 1,5%, Czech Republic still has one of the lowest interest rates on the market.
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