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Getting property financing from a bank is a common way for expatriates to buy homes in the Czech Republic if they wish to settle in the country. Obtaining a mortgage in the Czech Republic for non-residents is indeed a realistic scenario. However, the options and conditions for mortgage approval may differ from those available to Czech citizens.
Conditions for Property Financing from a Bank for Expats
If you’re a foreigner planning to buy property in the Czech Republic and need additional financing, getting a bank loan is one of the best ways to secure funds quickly and safely. Unfortunately, there aren’t clear-cut criteria that banks follow when deciding whether to grant loans.
Typically, Czech financial institutions may require non-residents seeking a mortgage to provide:
- Proof of Legal Status: You need to have a visa or residence permit in the Czech Republic.
- Sufficient Income: Banks usually require your income to be at least 3-5 times the monthly loan repayment amount.
- Clean Credit History: Expats must have a good credit history and no outstanding debts to other creditors.
- Deposit: A deposit of at least 20% of the property’s value needs to be paid.
In addition to these general requirements, property financing from a bank for expatriates may also require:
- Proof of income source, such as certified copies of employment contracts or bank statements.
- Expatriates may be encouraged to take out life and health insurance, covering loan repayment in case of death or disability.
After assessing the applicant’s creditworthiness, the bank decides on the possibility of providing a mortgage. The application process typically takes up to 2 months.
What is Cooperative Financing?
If you prefer not to approach a bank directly, consider exploring the concept of “cooperative financing.” This method is somewhat similar to bank loans, but instead of getting a mortgage, you acquire a share in a cooperative that owns the property.
A cooperative, or “družstvo” in Czech, is an organization where people join together to collectively own and use property, usually multi-apartment buildings. By purchasing a share in a cooperative, an expat gets the right to use one of the apartments. This financing method has several advantages: cooperative properties are noticeably cheaper, it’s a more accessible way to buy property than through a bank, and you can choose the size of the share in the cooperative.
If you are considering cooperative financing, it’s important to carefully select the cooperative you plan to invest in.
Chances of Getting a Loan
The chances of expatriates getting property financing from a bank depend on various factors. Firstly, the longer a person has been living in the Czech Republic, the higher their chances of getting a positive response from the bank. Secondly, expatriates with stable incomes are more likely to be approved for a loan.
It’s also worth noting that Czech financial institutions may refer to a “list of risk countries.” This is a list of nations with unstable socio-political situations, and residents from these countries may face difficulties in obtaining property financing. However, such practices are not widespread among banks, so the likelihood of loan approval for residents from these countries is relatively high.
For those considering property financing from a bank as expatriates in the Czech Republic, questions may arise regarding taxes, currency risks, the possibility of additional insurance, and other aspects. In any case, it’s crucial to thoroughly study the mortgage conditions and, ideally, consult with a financial specialist or lawyer experienced in real estate and expat financing in the Czech Republic.
