Confused about mortgages? Our specialists are ready to guide you and manage the whole process.
Frequently asked questions
What does it mean to refinance a mortgage?
Refinancing a mortgage means repaying an existing mortgage loan with a new mortgage loan from the same or a competing bank in order to obtain better terms (e.g., lower interest rate, adjustment of payment amount, extension of repayment period, increase in loan amount). Clients usually refinance their mortgages before the end of the agreed fixing period, with sufficient time to compare offers from other banks.
What does interest rate fixation mean?
You can choose a fixed or variable interest rate for your mortgage. Most clients choose the first option, where they can be sure that the interest rate and monthly repayments will remain the same for the period chosen. Clients determine the length of the fixing period themselves when arranging the mortgage.
How much equity do I need to have when applying for a mortgage?
LTV (loan to value) is an important indicator for a mortgage loan. LTV is the ratio of the amount borrowed to the value of the mortgaged property. The CNB (Czech National Bank) recommendation is that you should not get a mortgage above 90% LTV. If the LTV is 90%, the bank will lend the client 90% of the value of the mortgaged property and the client will pay the rest out of their own funds. This indicator is one of the important factors on which the interest rate is based (the higher the LTV, the higher the interest rate). 100% mortgages are not allowed to be granted by banks according to the CNB regulation.
Can I pay off my mortgage early?
Thanks to the Consumer Credit Act, you have the option to repay up to 25% of the total loan amount once a year, free of charge, within one month before the anniversary date of the contract. If you wish to repay more than 25%, the bank may charge you a fee. In case of hardship or at the end of the fixation period, you can repay up to 100% of the total loan amount.
What does the abbreviation APR mean?
The abbreviation APR stands for Annual Percentage Rate of Charge. It indicates the total cost of the loan and expresses the proportion of the amount owed that the borrower pays to the lender each year as remuneration for the money borrowed. The difference between the interest rate and the APR is that the APR includes all the fees associated with the loan (e.g. repayment capacity insurance, property insurance, application fee for registration in the Land Registry or loan drawdown fee, etc.). The interest rate itself can be misleading, so the APR should be the more important parameter.
What is the creditworthiness of a client and according to what rules do banks determine it?
The creditworthiness of a client means the ability to repay their financial obligations in a timely and proper manner. Banks use this indicator to decide whether to grant a loan to a client. Creditworthiness is also one of the parameters on which the final mortgage interest rate is based. Banks most often consider the applicant’s income (including its source) and expenses, payment history (records in registers), age of the applicant, occupation, marital status and the number of children raised or the highest level of education attained.