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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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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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