For citizens of the CIS, a mortgage in the Czech Republic is a profitable way to acquire their own real estate. This is due to low interest rates, a wide range of options and a limited package of required securities. This is also facilitated by the fact that in May 2009, amendments to the country's legislation came into force, allowing the purchase of real estate not only for legal entities, but also for individuals who are citizens of other states. In general, analysts note that the situation with the possibility of obtaining a loan by foreigners, including immigrants from the Russian Federation, has significantly improved in the Czech Republic in recent years.
Features of mortgage lending in the Czech Republic
There are a number of different mortgage programs in the Czech Republic. Their main features are:
- the opportunity to get a mortgage loan at reduced interest rates, which is due to tough competition among financial institutions, which generates a more loyal attitude towards borrowers;
- lack of compulsory insurance;
- the acquired real estate object acts as security for the loan;
- Individual approach to each client.
Using borrowed funds, it is allowed to purchase a house, townhouse, apartment, studio, etc.
On what conditions can foreign citizens get a mortgage in the Czech Republic
The conditions for the provision of funds by Czech banks for the purchase of real estate to citizens of other countries are similar to those that apply to the local population. They are formulated as follows:
- the term for making a decision on granting a loan - no more than 5 days;
- title insurance is not required - it is enough to insure the ability to work and life;
- in most cases, the size of the loan is 70% of the cost of the purchased housing;
- lending can be carried out not only at a fixed, but also at a floating interest rate.
Now a few words about the conditions that the borrower usually pays attention to first of all. It is about the timing and interest of the mortgage agreement.
For example, at Hypoteční banka, the loan must be repaid in a maximum of 30 years, while the interest rate for foreign citizens is 4.39%. Another popular financial institution in the Czech Republic, Komerční banka, charges 4% per year for using bank funds.
As for the term of the loan agreement, here a restriction is introduced not only on the maximum, but also on the minimum duration of the use of borrowed money. So, the loan must be returned no later than 30 and no earlier than 5 years from the date of the agreement.
Since 1993, a subsidiary of Sberbank of Russia, called Sberbank CZ, has been operating in the Czech financial market. It is noteworthy that our compatriots who have not received a permit for a long-term stay in the Czech Republic can take out a loan in it.
It should be noted that no other bank in this country demonstrates such loyalty when receiving a mortgage loan by Russian citizens. The following information eloquently testifies to the profitability of cooperation with Sberbank CZ:
- if the foreigner does not have a permit for a long-term stay in the Czech Republic, the mortgage loan is issued to him at 4.99%;
- lending to foreign citizens with a residence permit in the Czech Republic is carried out at 2.29% per annum;
- the minimum 1.79% is valid only for Russians with permanent residence in the Czech Republic.
Among other conditions for the issuance of a mortgage loan by a subsidiary of Sberbank, it is worth paying attention to the following:
- loan amount: minimum - 500 thousand kroons, maximum - 27 million kroons;
- loan duration: minimum - 5 years, maximum - 20 years;
- the amount of annual interest charges is fixed for 3, 5, 7 or 10 years.
However, it should be borne in mind that Sberbank CZ, as practiced by Sberbank in Russia, will issue a mortgage only after the borrower confirms an acceptable level of income, the source of which must be in the Russian Federation or in the territory of the Czech Republic.
How to get a mortgage loan in the Czech Republic
In order to receive funds for the purchase of real estate in this country, the borrower must meet certain requirements. When considering a loan application, banks first of all pay attention to the following characteristics of a potential client:
- age - the borrower must be at least 18 and not older than 70;
- availability of a long-term residence permit in the Czech Republic;
- the balance of the client's account with a Czech bank must be positive;
- stable employment in the Czech Republic;
- sufficient creditworthiness;
- at what stage it is supposed to buy an apartment - at the stage of construction of a building or a ready-made property;
- the financial reputation of the borrower - it must be positive, at least neutral.
At the same time, it is very important to choose the right mortgage program. Let's consider this issue in more detail.
Analysis of existing proposals
To draw up a long-term housing loan agreement in the Czech Republic, a citizen of another country must make an initial payment (hereinafter PV). There are no exceptions for foreigners in this regard. The size of the PV for borrowers of this category in Czech banks ranges from 30-50%. That is, if the value of this indicator is critical, you can find a more suitable proposal.
The volume of lending is a value derived from the level of a foreigner's solvency. At the same time, the Loan-to-Value Ratio (abbreviated as LTV) method is used to calculate the loan amount. This is the ratio of the size of the loan to the value of the collateral. In some financial institutions in the Czech Republic, this figure reaches 90% for local residents, while for citizens of other countries - 70%.
But regarding the duration of using borrowed funds, foreigners do not have much choice - the maximum loan repayment period is 30 years.
As for the interest rate, the most profitable option for our compatriots is cooperation with Sberbank CZ, which was discussed above.
After analyzing the available offers, a foreigner will be able to choose the optimal mortgage program and purchase a suitable property.
What documents will be required for registration of a mortgage
A potential borrower who does not have Czech citizenship, in order to receive borrowed funds, must prepare the following papers:
- application form;
- international passport;
- a document that confirms the status of stay in the Czech Republic;
- an extract from the bank account to which the salary comes and personal savings are deposited;
- a certificate reflecting the receipt of income for at least the last six months;
- an extract from the NBCH on credit history;
- documents for the property purchased in the Czech Republic:
- extract from the inventory;
- preliminary sales and purchase agreement (DCT);
- cost per square meter established by an independent appraiser, etc.
Some financial institutions may require you to provide an employment contract with an employer in order to find out the period of its validity. Of course, it is unlikely that a legally operating company will sign such a document with its employee for 30 years, so it would be better if the expiration date of the employment agreement is uncertain.
Opening an account in a Czech bank
This procedure is carried out in a branch of a financial institution and requires the personal presence of a potential client. There he fills out an application for opening an account, providing only two documents. In particular, it is mandatory to have a valid international passport, the applicant chooses another document at his own discretion from the following list:
- residence permit issued by the Ministry of Internal Affairs of the Chechen Republic;
- driver's license;
- birth certificate.
In addition, some banks may require a postal address in the Czech Republic for contacts.
Conclusion of a mortgage agreement
The procedure for obtaining a mortgage by a foreigner in the Czech Republic involves the following activities:
- Search for suitable properties.
- Preparation of papers for sending to the bank. At this stage, the translation of the documentation is carried out with its subsequent transfer to the creditor.
- Study and comparison of available programs from local banks.
- Preliminary PrEP conclusion.
- Submission of a loan application to the selected financial institution with the attachment of a full package of documents.
- Consideration of the application by the bank - it usually takes 5-14 business days. During this time, bank employees find out, among other things, whether the selected property meets the requirements.
- Actually the conclusion of a mortgage lending agreement.
- PV payment.
- Registration of the transaction in the state cadastre.
- Final settlement with the seller.
The preliminary monetary policy usually prescribes the maximum allowable time for the seller to receive funds. If they are exceeded, the buyer will face penalties.
What additional costs will be required for a mortgage in the Czech Republic
Receiving a loan is always accompanied by additional costs. In some countries, it is almost always necessary to insure the health and life of the borrower, as well as order an object appraisal.
In the Czech Republic, these costs are relatively low and do not exceed 1% of the volume of lending. In particular, we are talking about the following costs:
- borrower life insurance - from 200 to 1000 euros per year;
- services of a mortgage broker - the client pays him an amount in the range of 0.3-1.0% of the loan volume;
- notary agreement - the borrower pays about 0.2-0.6% of the loan amount for notary services;
- real estate appraisal - an appraisal report for a standard apartment will cost the client 200-500 euros.
There is no mortgage tax in the Czech Republic.
How to pay off a mortgage
Until recently, early repayment of mortgage loans was not practiced in the Czech Republic, so such a condition was simply not spelled out in contracts. In the event of such an operation, the borrower was subject to a fine, the amount of which reached 7-10% of the lending volume.
However, in 2021, innovations were adopted in the Czech banking sector, as a result of which borrowers were entitled to repay up to 25% of the loan amount once during a financial year without imposing penalties. If the entire body of the loan is repaid ahead of schedule, the fine will be about 2,000 euros (approximately 51.5 thousand CZK).
Finally
Long-term housing lending in the Czech Republic attracts primarily by low interest rates. Suffice it to say that even foreigners can get a mortgage in Prague at only 2-4.5% per annum.
With borrowed funds in the Czech Republic, you can purchase a residential building under construction or ready-made. The purchase of commercial real estate is also allowed.
The debt can be repaid within 30 years. But at the same time, the borrower must meet certain requirements, in particular, have a permit for a long-term stay in the Czech Republic, a high level of income, as well as their own savings to make an initial payment of at least 30% of the value of the property being purchased.
