In the Czech Republic, favorable conditions have been created for registering a mortgage for the purchase of both residential and commercial real estate. The government and local banks are interested in attracting foreign citizens to develop the economy. That is why mortgage in the Czech Republic have an interest rate much lower than in other European countries. As a rule, most financial institutions determine the amount of a possible loan in the amount of 70% of the cost of housing.
In the field of lending, there have also been some changes. First of all, this concerns the increase in the average interest rate on a mortgage. At the end of 2019, the average indicator increased from 3.17% to 3.56% per annum. These measures were initiated by the Czech National Bank (CNB) in order to stabilize the national currency and reduce inflation.
Tariffs in different Czech banks may vary depending on the term of the contract, the amount, individual financial policy of the institution. Non-residents of the country can use the profit earned outside the Czech Republic to pay for the loan. Loyal conditions to foreigners are also dictated by the presence of high competition among local banks.
In the mortgage market, an interest rate fixing system is being actively introduced for a certain time, for example, for 3, 5 or 10 years. According to the agreement, within the specified term, the borrower is exempted from paying additional commissions and fines. This is beneficial for the bank’s customer, as he can fully repay the mortgage without additional charges.
Mortgage in the Czech Republic: the basic rules
Both residents and foreign citizens can take a mortgage at the bank. According to the law on consumer loans, the key conditions for approval of a mortgage application are:
According to the adopted innovations, the mortgage in the Czech Republic debt should not exceed the borrower’s annual income (DTI coefficient). Currently, the most popular is the registration of a mortgage for a period of 1 to 5 years with a fixed interest rate. In the real estate market, this type of lending is 52%.
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