Purebred American mortgage differs from the classic mortgage loan mainly in two things: purpose and interest. We’ll explain the main differences to let you know which one is more convenient for you.
To obtain a mortgage loan, the bank must have a banking license granted by the Lite Lender. There are a total of 44 entities with a banking license in the Czech Republic. All other entities can only offer you a consumer loan.
A regular mortgage is a long-term loan linked to a property. Because it is purpose-built, the client must document documents related to the purchase, construction or conversion of the object. The most important is the current evaluation of the property during construction. The bank or other financial institution then guarantees only real estate – whatever they choose, not necessarily the one to which the loan is taken. Because it guarantees the loan, it will get more favorable conditions from the bank than if it applied for an unsecured loan: in our country it can reach interest rate of only 1.54% pa for a fixation for 1 or 3 years.The profitability of a mortgage loan is influenced by the amount of LTV, interest rate fixation period and the purpose or non-purpose of the mortgage.
Young people in particular had the opportunity to obtain a contribution from the state to mortgage loan interest. The amount of the mortgage and the amount of interest decided on the resulting amount. But when interest rates are low as recently, the contribution is zero. On the other hand, you can still deduct interest on the tax base, which will give you a very nice bonus especially at the beginning of the repayment.
It is neither a mortgage in the true sense of the word nor a classic consumer loan, the American mortgage stands somewhere in between. Unlike a mortgage, its drawdown is not conditional on the financing of real estate, compared to a conventional consumer loan you get a better interest rate. So there is no need to explain anything to anyone – you can use the US mortgage money as you wish. The conditions for providing an American mortgage are usually stricter, but you will still get a very pleasant interest rate of 2.89% pa for a 1-year fixation. Very advantageous is the possibility of the client to sell the burdened property at any time with a 1% penalty.
Some people have inadvertently used a non-purpose mortgage to repay their existing debts. Classic mortgages were also distributed regardless of the debtor’s ability to repay. This put many into a debt spiral and ultimately failed to return anything to the creditors. For this reason, and in order to maintain market stability, the Lite Lender decided to limit the conditions for granting mortgage loans by abolishing the possibility of obtaining 100% LTV and tightening the provision of loans to both mortgages and non-purpose unsecured loans. It will be helped by the Consumer Credit Act No. 257/2016 valid from 1 December 2016.