Basic overview of current offers for mortgage loans

Are you planning to purchase a real property and you’re getting lost in all the changes, conditions, rates and offers of the banks? We bring you a brief overview of current offers for mortgage loans.

If you’re going to deal with real property financing, one of the first questions of the mortgage broker today will be: “How many funds have you got saved up that you can use for financing?” The recommendation of the Czech National Bank completely changed the mortgage market in the last couple of months and therefore, we currently classify mortgage loans into two basic categories and these are mortgages up to 80% LTV (that is loans, where you’ve got 20% of funds from your own resources) and mortgages up to 90% LTV (where you’ve got at least 10% of the purchasing price of the real property saved up).

Mortgage loans up to 80% LTV

The Czech National Bank increased the interest rates in August and this increase is already starting to show even in offers of individual banks. In the case of buying real property and choosing the most common fixing for 5 years, the bank interest rates start at 1.88% p.a. and we’re not including the possibilities of other discounts, whether it’s the individual ones that we often manage to negotiate for our clients or discounts for the payment protection insurance, while it’s always necessary to consider the need for it and the total cost.
Nevertheless, several banks have already reacted to the increase of rates by the CNB and their initial offers start above 2% p.a. Despite that, these are still one of the historically lowest rates on the Czech mortgage market.

Mortgage loans in the range of 80-90% LTV

If you don't have savings of 20%, but less, then your funding falls into the category of mortgage loans up to 90% LTV. Due to the limitations of these loans by the Czech National Bank, the banks have considerably marked up this type of loan. Therefore, to obtain the 90% mortgage, you'll need to pay extra, since interest rates are typically about 1% p.a. higher than for mortgages in the range to 80% and they start at 2.79% p.a. (again, without the inclusion of individually negotiated discounts and discounts for insurance). With most banks, however, count with the fact, that you won’t get below 3% with a 90% mortgage. But it’s still appropriate to remember, that from a long-term point of view, this interest rate is more than decent.

100% mortgages

Unfortunately this product has already completely disappeared from bank offers. But a number of clients can obtain 100% of the purchasing price from the banks and in some cases, this doesn’t even have to be difficult. We wrote about the individual options in an earlier article.

Mortgage loan without a proof of income

We would look in vain for this type of mortgages (formerly very popular) in the bank offers as well. This restriction has an impact particularly on business owners who document their income through tax returns. Currently, the self-employed have even a more difficult position than before, since it’s possible to get a mortgage on declaration on the word of honour only when refinancing the current mortgage and only by meeting other conditions of the banks.

Summary

It’s evident from the above-stated, that apart from your income, a key role is played by the amount of savings, since the type of mortgage loan that you will apply for depends on that. Also, don’t forget the 4% tax on real property acquisition, which you’ll have to pay in most cases when you’re buying. In reality, you need 20% + 4% from your own resources for an 80% mortgage and 10% + 4% from your own resources for a 90% mortgage. Today, in the times filled with changes, it’s even more true that an experienced mortgage broker can secure not only above-standard conditions for you, but they can also be of significant help when looking for the most suitable form of financing.