Mortgage for a flat: what to expect when you apply
Owning your own home is increasingly becoming a distant dream. Due to the continuing rise in property prices, fewer and fewer people can afford to buy their own flat or house. Are you considering a mortgage? Prepare carefully in advance and find out what it involves. Now is an ideal time to apply – mortgages are breaking records, with rates hovering around two per cent. The average loan amount is also at its highest level so far this year, reaching CZK 2,865,000. In terms of the volume of loans granted, this is one of the most successful months in history.
Mortgages hold a privileged position among all other loans. This is mainly due to their size and repayment period – if you meet all the scoring criteria, banks may lend you millions of Czech crowns. However, you need to bear in mind that you will be repaying it for a very long time. Unlike with other loans, the bank also specifies exactly what the money may be used for. In this case, it is solely for housing.
Which factors are decisive when applying for a mortgage
“With all types of mortgage, you need to expect the bank to assess you according to its predefined criteria and scrutinise you as thoroughly as possible. When applying for a mortgage loan, your age is a key factor. The best repayment terms are generally offered to young people of working age with a stable income in low-risk sectors – the list of such sectors has changed significantly following the outbreak of the coronavirus pandemic. Mortgages can generally be obtained from the age of 18, while the upper limit is around 60. The closer you are to either age limit, the more reluctant the bank may be to provide the loan. At a young age, the reason is often uncertain income; at an older age, it is uncertainty about future repayments,” explains David Novotný, owner and managing director of the real estate company Bohemian Estates.
In addition to age, banks check whether an applicant is listed in a debtor register. Banks may overlook minor issues, but usually in return for a higher interest rate. If you are buying a flat under construction, meaning that it does not yet physically exist when the mortgage is being arranged, banks will also assess the developer and its reliability. In this case, the required documentation and a well-prepared project are key.
Mortgage interest rates are at record lows
Average mortgage interest rates have been falling for the seventh consecutive month. In October, rates approached the two per cent threshold at most major banks. The last time the situation was similar was in the first half of 2017. “I expect mortgage rates not to rise in the coming months, given the persistently low cost of funding and strong competition among banks. Nor can it be ruled out that the average interest rate will fall below two per cent – I can still see scope for a slight decline,” says David Novotný of Bohemian Estates, which has provided professional advice and services in property acquisition, management and sales since 2006.