If you want to apply for a mortgage in a Czech bank, there are several conditions you must meet. Pafin Foreigners brings you an exclusive easy-to-read overview of the basic characteristics of mortgage loans. Photo: Stock picture / Freepik.
Mortgage repayment terms: A mortgage loan can be taken out for a maximum term of 30 years (or 40 years in exceptional cases), up to the age of 70. Of course, the mortgage can be repaid earlier. Each year it is possible to repay up to 25% of the loan principal without penalty, and at the end of a fixed term, it is possible to repay the whole loan free of charge.
Fixed interest rate: The interest rate is always fixed for the period of your choice (eg. three, five, seven years), in the contract. Before the end of the fixed period, the bank will offer you a new interest rate and it is up to you whether you accept the offer.
Income: The bank always checks your income – employees provide confirmation of salary from their employer, and business owners or self-employed people submit tax declarations. There are several indicators for income. The first, DSTI, tells us that monthly mortgage repayments (or repayments on other outstanding loans) must not exceed 45% of the client’s net monthly income. The second parameter is the applicant’s total debt, which must not exceed nine times their net annual income.
LTV (Loan To Value): To obtain a mortgage, the applicant must always pledge the property to the bank. The LTV indicator shows the ratio of the loan to the value of the mortgaged property. The purchase price may not necessarily correspond to the estimated price; real estate estimation is carried out separately by each bank. A standard mortgage has an LTV of 80% – ie. 80% of the value of the property is financed by the bank and 20% by the applicant from their own resources. In exceptional cases, it is possible to apply for a mortgage with 90% LTV.
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