finance_czech

HOW TO GET BACK SOME OF THE INTEREST PAID ON A MORTGAGE:

Although mortgage rates are rising, and paying interest takes no small part of the family budget, but there is a nice moment for everyone who receives an official income in the Czech Republic, as an employee or self-employed: a tax refund for part of the interest paid on the mortgage.

In short, it happens like this: at the beginning of each calendar year, your bank sends an official confirmation of the interest paid on your mortgage.

You indicate this amount in a special box on your tax return, thereby reducing the taxable base by this amount.

It turns out that your total tax becomes lower (for OSVČ), or you get a refund (for employees), usually in May. The employer usually prepares the return for employees, so you just have to give the accounting department a confirmation from the bank.

The maximum amount of interest paid, which is used to reduce the tax base, is 300 000 Kč per year for mortgage agreements signed before the end of 2020, and 150 000 Kč for newer ones.

The important condition is that to use this option, your mortgage must be on real estate in which you or your close relatives live. You cannot use this refund on investment property.
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Put ❤️ if you knew about it, or 😤 if you didn't know about it

HOW TO CHOOSE THE BEST BANK FOR A MORTGAGE

Let me start with the fact that there is no universal formula for all clients. The parameters of a particular client, such as age, income, status in the Czech Republic, and citizenship of which country, play a very important role. And also, what exactly are you planning to buy.

At +/- the same rates, the conditions in each bank may be absolutely different. For example, with income from entrepreneurial activity and submitted a declaration for the past year, one bank will accept the maximum income of 30 thousand, and another - 50-60 thousand.

Or another example: spouse apply a loan where one of them is older. One bank will give a mortgage based on the age of the younger spouse, and the other bank will give a mortgage based on the older one.

Also, some banks are willing to accept rental income or various social payments (maternity, child care, etc.), while others will not.

Principles of consideration of applications from banks are very different, as well as methods of evaluation of the property you are buying (if the market price is adequate, in one place the evaluation will match the price, while in another - underestimated). And this factor greatly affects your credit if your funds are limited.

So I truly believe that the easiest way to choose the perfect bank for you is to apply through an experienced mortgage advisor (you know whom to contact😉 ). The services of a mortgage consultant in the Czech Republic are always free of charge for the client, because certified consultants receive their percentage after a successful transaction from the bank directly, and the price of the loan for the client this % does not affect. On the contrary, consultants often have access to confidential information about seasonal promotions of banks, when you can get a mortgage on better terms than if you come to the bank directly💪🏻
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So write me or call me (contacts in the profile header, Direct), I'll find the perfect product just for you🥰

THE PROCESS OF BUYING A PROPERTY WITH A MORTGAGE

Today I will share my experience for the safety process of buying a property with a mortgage.

It is common practice in the Czech Republic that the verbal reservation is usually kept to a week as maximum, then sellers and real estate brokers require a signed reservation contract with a non-refundable fee (usually about 50-300 thousand crowns). Therefore, my advice is to proceed like this:

• submit a preliminary application for a mortgage to the selected bank (without documents for the specific property yet);
• after receiving information from the bank that the bank approved the documents/income (preliminary, bank will officially confirm at this stage), you can sign the reservation;
• submit the final application to the bank, having already attached the documents for a particular apartment/house, land and order the appraisal of this property (whether online at the bank or processed by the bank appraiser);
• if the valuation passes the requested amount, the application goes to the bank for final approval;
• receive the bank's decision (officially confirmed by the bank), and only after that we sign the purchase agreement and the credit documents👌🏻

In the case of the reservation, in order not to lose it if the bank refuses, I can advise two options:
• to negotiate a due date for the reservation payment, for example, within 14 days after signing the contract, then we have time to get final approval from the bank;
• to buy real estate through my partner real estate broker, in which case we can add a clause to the reservation contract that if the bank refuses the mortgage, the reservation will be returned to the buyer (standardly, no third-party broker will not include such a clause in the contract).

I am always trying to minimize clients' risks and help to make the deal as comfortable as possible for all parties. I also always try to establish contact with the seller's side. My goal is not to sign loan documents at any cost in order to get my fee, but to provide the client with the highest level of service to the fullest extent that depends on me.
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Write to Direct, email or WhatsApp, who needs advice and support to get a mortgage ❤️

IMPORTANT MEASURES FOR A MORTGAGE - part 2

The first post was about LTV (see previous post if you missed it), today I am going to talk about the second equally important indicator that banks use when reviewing your mortgage applications - DSTI (Debt Service to Invome).

DSTI is the ratio of all your monthly loan payments to your net income (multiplied by 100, because it is calculated as a percentage).

Example:
You already have a consumer loan, which you used for renovations of your summer house, with a payment of 10 000 Kč per month, and you apply for a mortgage, with a payment of 25 000 Kč per month. And the net income that comes into the account is 70,000 Kč.
Calculate: (10000+25000)/70000))*100=50%

Since 01.04.2022, the Czech National Bank's requirements for this indicator for all banks are as follows:
• for customers under the age of 36 can be up to 50%
• 36 years of age and older: maximum 45%

Each bank has a small reserve, when customers meet all other requirements and have a high stable income to make an exception and approve with a rate slightly higher (but a maximum of 5% of all loans issued by the bank).

Also it was announced that from July 2023 there will be changes for this requirement, so will keep you informed.
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You will most likely never be told about all of these specifics at a bank branch if you apply there directly for a mortgage. So make an appointment with me and we'll discuss what's possible for you👌🏻

WHICH DIFFICULTIES YOU CAN FACE BEFORE OBTAINING A MORTGAGE

The topic is very broad. I will tell you in parts. But from my experience, everything can happen in the process of approving a mortgage loan😅

Once I had a case:

The client was employed and has provided the bank with proof of income from his employer on the bank's letterhead (a standard required document). The bank is required to verify this data, and they usually call the company's accounting department to verify this data.

And then something went wrong, because the accountant, who communicated with the bank, had probably bad mood that fay and answered either rudely or not what was expected at the bank. But the bank was clearly not satisfied.

As a consequence, the bank requested a lot of additional documents on income (even though the client's bank statement showed that the salary came regularly and from the same company).

In addition, we provided a tax return, an official form of income for the previous year, proof of social security contributions and an employment contract with all the supplements. Only after lengthy discussions with the bank's mortgage officer, with whom I work, and the risk department, the income was accepted and the mortgage was approved.

When I say that the bank branch will never work with you so thoroughly and carefully if you apply directly, without a mortgage counselor, I am not exaggerating. This application would definitely have been rejected, which means a ruined credit history and the inability to get a loan for several more years.
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For each application, I do a lot of work on the side of the bank, which customers often do not realize, and get better conditions than those offered to standard customers. So don't even hesitate to ask the bank for a mortgage yourself or through a consultant, and sign up for a consultation with me 👌🏻

MORTGAGE COSTS

Here's a quick rundown of the costs you'll face when you buy a property with a mortgage:
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• MONTHLY PAYMENT. It's pretty clear. Write to me to find out what your future payment will be, and I will calculate different options for you;

• MORTGAGE FEES. There can be several of them - application fee, for loan service, for drawing each tranche, for opening an account, etc. Each bank is different. I always explain to clients in details what to expect;
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• REAL ESTATE DEALER’s COMMISSION, which is usually 2-4% of the purchase price of the real estate;
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• FEES FOR THE REAL ESTATE CADASTRE. 2000 CZK for each agreement (pledge and purchase);
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• REAL ESTATE APPRAISAL REPORT. Sometimes banks do it themselves and for free, but most often you will have to order it from a bank-approved appraiser and pay for it yourself. The average price is about 5,000 CZK for an apartment and from 6,000 CZK for a house;
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• LEGAL FEES. The seller will also have to pay for the drawing up of the purchase contract, as well as for keeping and handing over the money from the buyer, if these services are not included in the services of real estate dealer (notary, bank or lawyers);
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• INSURANCE (REAL ESTATE AND LIFE/HEALTH INSURANCE). Property insurance is a prerequisite for obtaining a mortgage (for an apartment 3+KK the most basic insurance costs on average 3-3,500 CZK / year). If an insured event occurs, the bank receives the payment. Life insurance is not obligatory, but often banks offer a reduced interest rate if you take out insurance through the bank. A loan with a higher interest rate without insurance will be cheaper than a loan with a lower interest rate and insurance. But it is up to you.
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Hit ❤️ and share what costs you didn't know about

PAYMENT PROCESS WHILE BUYING/SELLING REAL ESTATE IN THE CZECH REPUBLIC

I remember my excitement when we were selling our apartment in Prague. It was my first real estate transaction experience here.

In my previous experience, the standard option for settling real estate transactions is safe deposit boxes. Here it works differently, the payments are made noncash through a special account (účet uschovy), which can be arranged:
✅ with a lawyer (the most popular way);
✅ at a bank;
✅ with a notary (less often)

The fee for this service ranges on average from 5 to 20 thousand CZK (usually, if you use a real estate agent, this is included in the fee. But it may be otherwise by agreement of the parties).

The basic principle of such accounts is that the seller receives his money only after the buyer becomes the owner of the property. Until then, the money from the buyer is kept on the account. The whole process of registration and delivery of documents is controlled by the one who has the account (bank, lawyer, notary).

Thus, to carry out transactions of purchase is quite safe process in the Czech Republic.

Here, too, of course, there are some risks (withdrawal of the license from the bank, as happened with Sber, unfair lawyer - all lawyers must have a license and insurance for emergencies, but as practice shows, even here can be cheaters - recently there was a case where the lawyer ran away with the client’s money😳). But in general, these are exceptions, and usually such deals go smoothly.

Never make any settlements with real estate transactions in cash or directly to the seller's account (the exception is the reservation deposit: often the payment goes straight to the seller's or real estate agent’s account, this is normal practice).
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If you have experience with transactions, please share which account you used and how convenient and smooth it was. Also, I would appreciate❤️

HOW TO SHOW THE BANK YOUR OWN FUNDS

When you purchase an apartment with a mortgage, you should count on the fact that part of the cost of real estate has to be from your own savings.

Usually, before approving you a loan, the bank checks the availability of these own funds, and very often - the source of their origin.

Here everything should be logical and clear to the bank. That is, if you have an income of 20,000 Kč per month and you have savings of 2 million, and you declare that these are the funds accumulated from your salary, then the bank will definitely have some questions.

If part of your amount is the sale of real estate, a gift from a close relative or, for instance, an inheritance, you must be prepared to provide to the bank supporting documents, translated into Czech (contract of sale, gift contract, statements of accounts of depositing money, etc.).

The fact that you have the money is not enough , it is important to show where you got it from.

In a situation where you can't logically explain the source of the origin, your application for mortgage is more than likely to be rejected.
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Very often when preparing an application to the bank, clients are surprised that such requirement exists. But don't forget that the bank is required to verify the source of the funds that pass through them, as they report to the regulator. I look forward to your ❤️ if the information is useful

Hi everyone! A few greeting words to all new people here:

Welcome to my new English speaking account which will be about Czech mortgages, financial news, sometimes about daily life in Czech Republic with kids and dogs 🙂

I’m working mum of 2 kids (3rd one is coming soon🤰🏻😅), happy owner of cutest dog ever - bichon Luna. I’ve been leaving in CZ for more than 13 years, 2 years ago moved from the city flat to the house outside of Prague (best division for our family).

But mainly I’m here for you to tell about mortgages in simply words. You can contact me using DM, WhatsApp, email or phone number for questions, consultations, bank mortgage proposals or business cooperation.

I have financial background for more than 18 years (international banks and corporations) and 7 years in Czech mortgages (I’m certified consultant working with almost all main banks in CZ). So I would tell you here in simply words about finance and mortgages.

I promise, that it will be useful and you’ll like it.
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Welcome and enjoy❤️