Three real estate financing schemes: installment plan, mortgage, loan

Nowadays investors can come across the problem of how to pay for the real estate they want to possess. We are going to tell you about 3 schemes of funding for real estate in the Czech Republic.

Installment of payment

To begin with, the investor should be aware of that terms of installments from the developer are individual. Each company develops its own financial strategy. The majority of Czech developers usually offer interest-free installments exceptionally for the construction period, namely, for a year or two. In this case, the investor must pay 10-20% of the value of the object at the time of signing a contract. When the building is commissioned, he will pay the remaining amount.

Furthermore, some companies suggest accepting installment for a longer period — for five or even 10 years. However, the buyer must pay interest. Generally, 4-8% per annum.

Mortgage

People in the Czech Republic are obsessed with the mortgages. Investing this way is pretty profitable. Lending volumes are rising, and interest rates are impressively low. The rates for foreigners without a residence permit are from 2.5% per year. Nevertheless, the Czech conditions are attractive in comparison with other European countries.

Banks provide investors with mortgages both on new buildings and on the “secondary housing”. One also should emphasize that a foreign borrower is required to contribute 40% of the value of the object with his own money. A loan can be given for a period of up to 25 years. It`s significant to remember that the age of the borrower cannot exceed 67 years by the time when the mortgage will be over.

Investment loan

If you are buying a more essential object from the point of view of value (a lucrative house, hotel or office), then you are able to receive an investment loan. In case you get a commercial loan, the object itself and the income it can generate are analyzed by experts. It is supposed that the debt will be repaid from these funds.

Investment loan is meant to finance a property that produces earnings. It is issued on a legal entity registered in the Czech Republic. Anyway, the owner of the company can be a foreigner.

Everything considered the situation in the Czech Republic is rather favorable. The banks possess a lot of “extra” money, and they are searching for the people and possibilities to invest them.