Mortgage at one stroke

Recently, the topic of mortgages is being mentioned very frequently. The main reason is the regulation imposed by the Czech National Bank. Mortgage banks obey recommendations of the Czech National Bank (hereinafter referred to as the CNB) limiting certain parameters.

The most important changes that occurred are the following:

• Your monthly instalments are to be no more than 45 % of the net income. For instance, if your salary amounts to 30.000 CZK, instalments of a new mortgage and any other loans are not allowed to exceed 13.500 CZK.
• Another limit for getting a mortgage is the maximum limit of all loans, which is set at ninth as much compared to your annual salary. If you have the salary of 30.000 CZK, the bank can provide you no more than 3.240.000 CZK. In case you already have a car loan or simply another loan it might be more difficult to get a mortgage in a bigger city.
• Your own resources should account for 20 %. In the case of 10 %, a higher interest rate is to be expected.
• The consultant who helps you with your mortgage shall have professional examinations and be registered by the CNB.

If the bank provides you with a mortgage, many administration steps which have to be completed are left, taking up to 5 or 6 weeks:

1. Consultation

Mortgage adviser compares several banking institutions, including a detailed comparison of interest rates, fees and monthly instalments. It makes you know the maximum amount of money banks can lend you.

2. Bank selection

The choice of a bank should be made not only with regards to the lowest rate but on the grounds of the total costs. Internal processes and attitudes of different banks should also be taken into account.

3. Signing the loan application

If you already know which bank provides you with the most favourable terms, signing the loan application follows.

4. Prescoring (scoring)

Prescoring is the first step that actually begins processing in the bank. Before the final selection of the property, you should get acquainted with conditions under which the bank is willing to give you a mortgage and at which rate. The result of the prescoring is usually known the following day.

5. Completing documents for mortgage approval

The next step is the completion of the documents needed, i.e. an income statement, an account statement, an evaluation of the property, a draft of both reservation and purchase contract.

6. Mortgage approval

Approving mortgage is an important moment which makes you sure that funding is secured.

7. Signing the documentation related to the mortgage loan

This step usually follows within two weeks since the approval.

8. Completing documents for drawing the loan

A good advisor helps you with those matters which are not arranged by your bank. He or she should secure necessary administration work: the insertion of pledges in the cadastre, calculating real estate insurance, arranging the insurance as well as the pledge of insurance at the insurance company. The advisor should also communicate with the seller ensuring appropriate cooperation.

Not every advisor manages to assist clients in the processing of a mortgage “at one stroke”. Don't hesitate to ask for more details, procedure and all you need to assess the advisor's competence.

Ondřej Marek, property advisor, ondrej.marek@sbelter.cz