The Czech Republic is a European power in terms of the number of concluded building savings schemes. It occupies leading positions alongside Austria and Germany and does not seem to change anything about it. Just to illustrate: There are currently 3,312,077 active savings contracts in the Czech Republic, last year alone, Czechs concluded 403,259 contracts
State aid still attracts
The popularity of building savings arises mainly from more interesting and certain appreciation thanks to state contributions. They are no longer as generous as they used to be, but the opportunity to improve by USD 2,000 a year is most people hear. One of the conditions is to save USD 20,000 per year.
Another requirement is the aforementioned six-year tying period. If we terminate the building savings contract sooner than after six years, we will lose the already credited state aid advances of up to USD 12,000. And not only that.
Early termination of the building savings contract fines. The amount of penalties ranges from 0.5 to 1% of the target amount – and this is the amount that many clients change their early departure from the savings bank.
When concluding a contract, savings banks assume that the client will take advantage of all the product benefits of building savings. Therefore, claiming state aid is conditional on the six-year duration of the contract – earlier savings are considered by building societies as non-compliance.
Bridging in credit? The rules are set by law
The widespread myth is that after a six-year binding period, the client’s savings account is entitled to a building savings loan. However, it is governed by other rules – the most important is to save a certain proportion of the target amount. And it doesn’t matter if the client saves this amount for three or ten years.
Another condition for obtaining a loan is also obtaining an evaluation number. Even his exposure takes a while. In addition, a building savings loan can be applied for no earlier than 24 months after the conclusion of the contract.
Building savings is also attractive for relatively low interest rates, which, moreover, does not change over the binding period. This, moreover, is legally governed by a law that prevents arbitrary interest increases in a situation where clients cannot, without avoiding a fat fine, terminate the contract with the savings bank.
Will “building” replace mortgage loans?
The average interest rate on bridging loans is around 2.67% at the end of May 2017. In a situation where the mortgage market is in turbulence, building savings loan is becoming an increasingly attractive alternative to the mortgage. In addition to attractiveness, bridging products add annuity repayment, which promises lower costs. So far, only a handful of savings banks offer it.