Jan 31, 2024

Buying Holiday Homes with Czech Financing

Robin Petrasek

Robin Petrasek

Owning property in Prague or the Czech Republic is the goal of many.

To live in a city with such a rich history, beautiful architecture, work opportunities, and safe and clean (mostly) environment is surely very nice, but once you accomplish this dream, you might ask “What’s next”?

Then you remember a holiday destination in the Canary Islands, or a house in Croatia, perhaps a flat in your home country, or maybe property in Spain or France? If you do not have the cash to pay for it from your own sources, the logical question is “Can the bank pay for it”?

The answer is YES, but… Czech banks will not use properties abroad as mortgage security or collateral since they do not understand the local laws and can only help if you can provide sufficient collateral here.

Let me work with the basic assumption, that you are financially stable with above-average income, you already bought a property in Prague a few years ago, and you know what you are doing. I will also not discuss the investment potential of these holiday homes, since that is another topic to be covered and probably not by me. Let me explore how the bank can pay for your holiday home for you.

There are a few ways. Actually Four that I know of.

Option 1 – Releasing equity via American mortgage. This is the simplest way to get money from your property for further investments. American mortgage (not to do with the continent, just a Czech term!) it’s is a type of loan where the bank does not care too much about how you use the funds.

Assuming you have enough value in the property, banks can typically lend you up to 70% of that value with which you could buy a holiday home abroad. The downside is that American mortgages typically have a higher rate and shorter duration.

Option 2 – Releasing equity via regular mortgage. There are a few banks out there that can take your current property, grant a regular mortgage, and allow you to send the money abroad. It is a very tedious process with a lot of paperwork, but it is possible.

You would need to show the purchase contract for your new holiday home and similar to the way it transfers money here, the bank would send the money abroad.

Option 3 – Buying property in Austria There is one bank that accepts collateral in another country, an exception to what I wrote before. That is if you are buying in Austria. You can buy a property, without security or even owning a property here at all with 70% financing.

We would be speaking typically about the mountain apartments or houses for skiing and that is doable with financing from the Czech Republic with no previous collateral here.

Option 4 – Personal loan The last option is simply to borrow the money via a personal loan. On one personal loan, you can typically get max 1m CZK, in some banks up to 2m CZK with a relatively short duration of 8-10 years, so watch out for higher repayments. You might need to combine loans from a few banks too, in case the property is a bit more expensive.

Please consider all purchases responsibly. Having a property abroad can also come with downsides in the form of property management, local laws and regulations, selecting the right property and agency, and many more. While we cannot help with selecting the properties, if you would like to discuss the financing options, as always we would be glad to be of assistance.

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