Mortgage for foreigners

“Can I get a mortgage loan if I am a foreigner in the Czech Republic?”

According to bankers simple answer is yes! foreigners, resident or not, can legally buy real estate property in Czech. There is overview of elementary bank conditions how to arrange mortgage loan. It is possible to finance real estate property for own housing or also as an rental investment, we focus on both scenarios.  The best way how to apply for credit is to use one of the top traditional international bank however some small Czech bank can offer individual approach and benefits.

EU non-residents
As non-residents banks consider clients without permanent residence in the Czech and at the same time with different nationality from the Czech Republic.

1. Maximal 80% Loan To Value (LTV)
2. Minamal 20% own savings to co-finance purchase price
3. Debt Service To Income (DSTI)*:  max. 45%
4. Debt To Income (DTI)*: max. 9x
5. Temporary or permanent residence in CZ at least 3 years
6. Income ideally employment contract from Czech with indefinite duration
7. Assured by a notarial deed of recognition of debt with permission to enforce

The granting of mortgage loan to non-residents is possible as well if co-applicant is Czech husband/wife who has income in the Czech Republic.

Procedure how to manage loan is described in steps here:

There are basic mistakes good to avoid:
– 100% loan is not allowed, market value of house/flat for your bank may be lower,
– do not forget to include transfer tax payment 4% in your calculation,
– do not forget to include commission to real estate agency (is due on the beginning).

Czech real estate business practices and habits:
– usually commission to real estate agency is 4 or 5% from purchase contract,
– commission to real estate agency is due on the beginning within 5 days from signing reservation contract,
– reservation deposit is not refundable by real estate agency if buyer will resign to purchase contract,
– if bank will decline mortgage loan real estate agency usually not return commission back,
– money are deposit on lawyer saving bank account until Cadastral office will transfer property right to new owner,
– Cadastral office will not transfer property right earlier than in 21 days, max. period is 51 days.

How to get mortgage in Czech?

Do you want to buy flat or build your own house in Czech Republic? Do you need take a loan from Czech bank? Here is  overview of the basic legal conditions required by Czech National Bank (CNB). These rules are universal for everybody despite you are Czech citizen or not.

Mortgage rules:
1) Object of purchase: flat, family house, apartment house, cottage or building land,
2) Loan to Value can be max. 80%,
3) Own savings: 20%  of your own money you have to invest first,
4) Debt Service To Income:  max. 45% monthly payment of loan vs. your’s net income,
5) Debt To Income: max. 9x – total loan vs. early net income,
6) Scoring of bonity: positive stable sufficient income, no negative history about previous loans.

Recomended steps how to stay on safety side and has situation under control:
1) Ask your mortgage broker to prepare credit offers and compare coditions,
2) Asko your broket to do scoring of bonity in bank before signing reservation contract with real estate company,
3) Let do valuation of house or flat you want to use as bank quarantee (pledge) by bank technician,
3) Reservation contract with real estate agency can be signed,
3) Let check purchase contract, therms and conditions of widrawing money has to be usualy adjusted with a bank,
4) Mortgage loan will be approved by bank and shall be signed,
5) Signing purchase contract at a notary office,
6) Signing pledge contract at a notary office.

Need more explanation of above terms? Or need to know your scoring? Please contact us by form.

How to recognise good financial advisor?

1. The mortgage advisor is not a sales representative

A good mortgage advisor is usually an independent so he should logically cooperate with several financial institutions and not only offer products from one of them, otherwise it would be a sales representative of a particular bank. The main reason why the services of independent mortgage (financial) advisors use them is primarily the wider range of services offered and their experience.

2. He listens first, then suggests a solution

A quality mortgage advisor will first listen to you, find out ideas about the acquired property, verify your financial possibilities, time frame and actually the reality of your entire project. A good advisor never offers a single solution or offer from one bank at the first meeting. From the first call or meeting, count about one week before suggesting a suitable solution and submitting a comparison of the offers of more banks or building societies.

3. Certification and passing the professional exam

Beginning 1 December 2018, the provision of consumer credit for housing (mortgages) is regulated by the CNB’s rules and all “creditors” must be properly certified. We wrote here. So make sure that you meet this condition and make sure you are not dealing with someone who will only forward your documents to your friend. Even though there has been a significant reduction in the number of intermediaries, we recommend that you find the history of your advisor in the Commercial Register or Trade Register, as well as the details of the intermediary’s age or the length of time the company operates in the market.

4. Offer of the loan

If your adviser promises you an unrealistically low interest rate, be careful. The Consumer Credit Act regulates the form of the loan offer, so it must always include: APR, interest rate, details of all fees, which are part of the total cost of the loan, the amount of the individual installments and the total amount due, the duration of the loan, information on the obligation to conclude a contract on supplementary service related to the loan (especially insurance if the conclusion of such a contract is a condition for obtaining a loan under the conditions offered).

Be realistic and not be tempted by unrealistic temptations and insist that the submitted bid contain legal requirements.

5. References, experiences

We recommend that you check the references of your consultant, ask for a phone call with a previous client. If the client was satisfied, he would certainly not refuse to help his advisor to acquire a new client. On the other hand, a serious consultant will not lure you into contact with his friends, but will rather rely on you to recommend it because you want the best for your friends.

If you have some doubts with offer of loan you have and needs our advise please contat us through the form.

Changes on Czech financial market

Housing financing at the beginning of 1 th December 2016 were changed, the rights of clients were strongly improved.

The most important benefits for clients:

1. The “cooling off” period of 14 days. Clients have now a 14-day “cooling-off” deadline prior to signing a credit agreement whereby the bank may not change the terms of the loan during this period.
2. Extraordinary mortgage payments free of charge. Newly, clients can give up to 25% extra payments every year free of charge.
3. Penalties for early repayment, in the case of exceptional life situations: sale of real estate, death of the debtor, or divorce, the penalty for early repayment is reduced only to the purposefully spent costs of the bank corresponding to the bank’s expenses for early repayment (1% of unpaid principal max. 50,000 CZK).
4. Structured offers. Banks need to provide information about the total cost of the loan in a fixed structure so that the individual offers of individual banks can be better compared with each other. Banks must indicate the RPSN.
5. Appeal against the Bank’s Misconduct, newly introduced the possibility for the client to appeal against the nullity of the contract, if the bank failed in the scoring and provided the loan demonstrably to the debtor unable to repay, this period is 3 years.

The new disadvantages for clients:

1. Stricter assessment of the applicant’s financial situation, more detailed examination of revenue and expenditure structure. For example, banks examine a bank statements of client.
2. Longer period of loan processing.