How to arrange a mortgage part 2: Documents and fees

After verifying the creditworthiness, it is time to prepare the documents that the banks require from the applicants. These are copies of personal documents, certificates of income and expenses provided to the client by his bank, with which he has an open account or a tax return in the case of a self-employed person. It is also necessary to document documents related to real estate, such as a title deed, a draft purchase agreement, a reservation agreement, an extract from the real estate cadastre, a building permit and the like. The specific documents depend on the purpose for which the mortgage is to be used.

Bank fees:

• loan management fee - around 100 to 400 crowns per month,
• a fee for making a loan application in the order of thousands of units, many banks currently no longer charge it,
• a fee for registration in the real estate cadastre, which has been CZK 2,000 since January 2020,
• real estate appraisal fee.

As for the mortgage adviser, his commission is paid by the bank and the client therefore does not pay it directly. Therefore, it is important to mention that commissions for mortgage settlement are usually the same for solid brokers from all banks, in order to avoid favoring one institution over others and to look only at the client's interests.

The fee for estimating the price of real estate must be emphasized in particular. When buying a mortgage, banks require an expert estimate of the price. At the same time, they have their own appraisers, with whom they cooperate and which services the applicants use. It is also possible to use the services of an external appraiser, but it can easily happen that the bank does not recognize such an estimate. Sometimes banks are satisfied with an online estimate, in which you just fill out a detailed form with information about the property and possibly provide the required documents (title deed, title, etc.)

Compulsory insurance of the mortgaged property must not be neglected either. If the mortgaged property is uninsured, the banks will reject the loan application. Sometimes, loan repayment insurance may also be required.

Mortgage repayments and how to avoid early repayment fees

Repayment is then most often made in monthly installments in an annuity manner, which means that the amount of the monthly installment remains the same throughout the repayment period. However, the ratio of the share of interest and amortization or principal in a given installment changes. In the initial period, the share of interest prevails, in the end, on the contrary, depreciation. However, some banks also offer degressive (declining) or progressive (increasing) repayments. Banks charge clients for early repayment of a loan due to lost income from loan repayments, but this also depends on the specific conditions stipulated in the loan agreement.

Fees for early repayment of a loan with a fixed interest rate can be avoided in certain situations under precisely defined conditions. Once a year, it is possible to repay 25 percent of the total loan amount without the obligation to pay early repayment fees. However, if the amount is over 25 percent, the bank can already apply the fees. A specific situation is also the sale of mortgaged property. If at the time of the sale the loan agreement has lasted for more than two years, the client has the right to repay the remainder of the amount due, provided that the fee charged by the bank may not exceed one percent of this extraordinary installment and its maximum permitted amount is 50 thousand crowns.

Repayment of the debt in full free of charge is also possible on the anniversary of the fixation, ie when the client ends the fixation period of his interest rate and other loan conditions specified in the contract. In such a case, the debt can be repaid within three months from the moment the bank informs the client of the new interest rate for the next period. Repayment of the loan free of charge is also possible in the event of a difficult life or financial situation leading to a deterioration in the ability to repay (death, long-term illness or disability) or when it is repaid from insurance designed to secure the loan (eg destruction of real estate by fire, etc.).