Getting a Czech mortgage in 2020: everything you need to know

In the aftermath of the coronavirus pandemic, the fallout for the real estate industry in the Czech Republic is being widely debated. When it comes to property prices and trends in buying homes, many experts are suggesting that prices will remain stable and that we’ll see a movement away from cities and toward the socially-distanced suburbs.

Tomáš Jedlička, financial advisor and Expats.cz mortgage specialist says that currently, the Czech National Bank has eased some mortgage conditions, allowing banks to offer 90% loans again and removing the condition that the total loan should not exceed nine times the net yearly income of the applicant. He says that rates are also down, making this a good time for potential homeowners to act.

Currently, the loan application process, as well as property assessment, is also free of charge. If you are a foreigner considering taking out a mortgage in Prague or the Czech Republic, here’s what lies ahead.

Qualifying for a mortgage as a foreigner

For foreigners living in the Czech Republic, securing a mortgage will be more complicated than it is for the average Czech citizen. Nevertheless, in most cases, it is not an impossible task. Keep in mind that it will help immensely if you have a Czech speaker or mortgage specialist to assist you throughout the process.

Banks and mortgage providers use a variety of criteria to determine a person’s mortgage eligibility. To complicate matters, each bank has its own policy and specifications regarding a foreigner’s eligibility. This can also work in a person’s favor: If, for example, you are rejected for a mortgage by one bank, you may still be approved by another.

Residency requirements

In general, the basic criteria for a foreigner applying for a mortgage is that they have either have temporary (přechodný pobyt), long-term (dlouhodobý pobyt), or permanent residency (trvalý pobyt).

Most banks will accept applications from foreigners with permanent residency, while some accept applications from foreigners who only have temporary or long-term residency. 

Foreigners in the Czech Republic without official residency status can apply for a mortgage through an s.r.o., a Czech limited liability company.

Country of origin and risk categories

Lowest risk: the Czech Republic and Slovakia (including foreigners with Czech citizenship)

Low risk: EU and European Economic Area (EEA) countries

Medium risk: Third countries (People from relatively low-risk countries outside of the EU and EEA such as USA, Canada, Russia, China, Australia)

High risk: primarily countries in Africa, the Middle East, and Asia (Oman, Saudi Arabia, Vietnam, Sri Lanka)

Financial standing

For all mortgages – whether for a foreigner or Czech citizen – financial standing is key. Monthly payment of installments should not exceed 50% of the net salary. The total value of loans should not exceed 9 times yearly net salary.

Freelancers may also be considered for a mortgage provided they can prove a steady stream of income, only from the Czech Republic not from abroad.

Essential documents needed

Of course, there is paperwork that goes along with applying for a mortgage. In addition to proving the amount, source, and reliability of your income, foreigners will also need to provide certain personal information such as citizenship and marital status.

You can apply even without property in mind – the bank will assess your credit score, tell you if you are eligible and the maximum amount of loan. Then the client has three months to find a property – if not, the application will expire.

Where to go for additional help

A mortgage broker is an intermediary who works with multiple lenders and is paid a referral fee by the lenders. Mortgage brokers are a one-stop-shop, offering complete real-estate financing and legal guidance to both foreign individuals or property investors. Working with them is a popular option among borrowers because many banks offer discounted rates to mortgage brokers who bring them business.

One caveat, when it comes to mortgage brokers, however: don’t let them talk you into additional services that don’t make financial sense to you (on the other hand, brokers can help you acquire the building insurance that is required by the bank).