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How to Obtain a Mortgage for a Czech Investment Property

The mortgage rules have really changed over the last 5 years. In particular with regard to non-Czech citizens who are investing in property – the focus of this article.

In 2006, 2007 there were numerous banks vying for this type of clientele.

However, with the crisis in 2009 all banks tightened their lending criteria and in particular, with regard to exactly these types of buyers. Many will not lend to them at all.

 

 

Making sure the broker or bank rep has experience with foreigners can save you hours of frustrations.

Also an interesting change is that while previously there were a handful of banks granting mortgages to SROs with similar conditions to individuals, this has almost totally closed off. Presently a mortgage through an SRO will have much higher interest rates than for a physical person.


The general terms for currently obtaining a mortgage for a foreign investor are:

1. The bank will not lend more than 90% loan-to-value. The value will be set by an internal evaluation from the bank or one of their approved contacts and not from the purchase contract.

2. The maximum lending period will not exceed 30 years with the most likely offer being 15 or 20 years. The length of the mortgage will be limited by the age of the borrower. Typically it will not be longer than reaching past their 65th birthday.

3. Interest rates are offered as fixed for a period between 1 to 5 years. There is currently only one bank that we know of offering a ‘floating’ rate which is pegged to the Czech National Bank rate.


4. Your personal presence will be required in a branch of their bank at some point of the mortgage process. The rest can be done via email or through a broker with power of attorney.


Generally the banks will not consider income from the building into their equation for your eligibility for the mortgage or if they do, they will only count with a percentage of it.

The absolute best scenario for getting a good rate and the most offers is if the foreigner: 1. lives in Czech Republic and has a long-term residence permit and 2. is employed by a Czech company or branch which pays the salary to a Czech bank account.

Other scenarios are definitely possible but you can expect the rate to be slightly higher and your options of banks will be more limited.

When dealing with bank reps or mortgage brokers it is important to choose ones who have experience with foreigners investing in property. A lot of time and money (obtaining documents, legal translations) can be wasted when the individual does not have experience with this particular scenario.


Current recommendations

If you are a foreigner without a residence permit in Czech Republic we would recommend that you try Hypoteční banka.

If you have a permanent residence permit in Czech Republic or are an EU citizen you have additional options with GE Money and Fio Banka. If you also earn income within Czech Republic you can look at UniCredit Bank, Raiffeisen Bank and LBBW.

Česká spořitelna is about the only one now offering mortgages to SROs at present. They will also consider the rent as part of the income equation. 


by Nathan Brown - nathan@czechpoint101.com - owner and managing director of Czech Point 101  - "You’re in good hands whether buying, selling or managing property in the Czech Republic."     

 
 
 
 
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