Is a mortgage or building savings loan worthwhile?

The CNB tightened the conditions for obtaining a mortgage loan . Does this tightening lead to a return to building savings? Isn’t building savings loan worth more than a mortgage now?

First I have to save, then can I take credit?

money loan

Yes and no. If you have saved a minimum percentage of the target amount and save at least 2 years and at the same time you have fulfilled the “evaluation number”, you draw the so-called regular loan from building savings . If you do not meet any of these conditions, you will use a bridging loan . So you can get money even if you have not saved, even if you do not meet the condition of two-year savings.

Building savings loans are harder to compare

money loan

Not that comparing mortgage loans was easy, but compared to building savings loans it could be said that it is a little easier. This is primarily a method of repayment. The repayments of the building savings loan consist of several parts .

1) The bridging loan phase

money loan

In this case, two amounts are repaid:

(a) interest on the total amount of credit
b) so-called uptake , which is the amount that is saved up to a certain minimum amount of provided loan (target amount). Usually this minimum level is between 40-50%.

The interest rate on the bridging loan can be fixed for the whole duration of the loan or only for a certain period of time (3, 5, 10 years), similar to the mortgage loan . It also depends on the interest rate, which can be cheaper, but also more expensive than a standard mortgage. You can accelerate the termination of the bridging part of the loan by the amount of the additional amount . There is also the possibility of extraordinary installments without penalties or charges .

2) Regular credit phase

money save

Here comes the same method of repayment as the mortgage . It is nice that at the moment of granting a regular loan, the original bridging loan is partially repaid by the saved amount in the building savings account and the rest is amortized by a regular building savings loan.

Compared to the mortgage, however, a regular loan has a fixed interest rate throughout the repayment period, which can be an advantage and disadvantage (depending on the current situation on the mortgage thorn). Furthermore, there is the possibility to repay the loan at any time without any penalty , which most mortgages outside the period of fixation does not allow.

Tip

There are two building societies (Modrá pyramida stavební spořitelna and Stavební spořitelna České spořitelny), which offer an “improved” loan, with the bridging loan and maturation phases shortened. At the same time, they offer a repeated fixation of the interest rate for the selected period. So the repayment process of the whole loan is very similar to the repayment of the mortgage.

Gradual drawing of the loan

Gradual drawing of the loan

If you plan to draw a loan gradually over a longer period of time (eg in the construction of a family house or in development), then there is another fact to consider – see below.

Difference in gradual drawing of credit:

Building savings loan

Mortgage loan

after the first drawdown you pay the entire installment

you only pay interest on the average drawn part of the loan for each month

no matter how long the loan is drawn, you will not pay any extra

only after the drawing has been completed, you will repay the interest and part of the debt within one installment

Here you can see that if you have a mortgage, the longer you take out the loan, the more you overpay . On the other hand – at the time of construction of the house you can probably pay the rent for the existing housing and not paying the full amount of the installment may be useful .

However, it should be borne in mind that this rule does not apply to all mortgage loans and all building savings loans . As in everything there are exceptions. Therefore, we recommend that you always consult your situation with a comprehensive financial advisor.

Loan for the purchase of a cooperative apartment

For a selected building savings bank you can save significantly if you need a loan to buy a cooperative apartment with its subsequent transfer to private ownership within 12 months. So you don’t have collateral now.

Building savings loan

Mortgage loan

Until you secure the loan by pledge (until the cooperative apartment is transferred to your personal property) you pay a monthly flat fee of a small amount

until you secure the loan with a pledge (before the cooperative apartment is transferred to your personal property) you pay a higher interest rate, ie thousands of dollars

To put it simply, building societies are willing to offer relatively high loans without the need for immediate collateral. The same, however, some mortgage institutions, even without limiting the amount of credit.

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