According to data from the Czech Statistical Office, at the end of 2021 there will be more than 660 000 foreigners residing in the Czech Republic, with more than 321 000 of them having permanent residence. In terms of nationality, Ukrainians are the largest group of foreigners, followed by Slovaks, Vietnamese and Russians. “Foreigners who have already been in the Czech Republic for a long time, have stable employment, have established their own family here and do not plan to return to their home country permanently apply for a mortgage to purchase their own home. So far, the most frequent applicants for mortgages have been Slovaks, who are the closest to Czechs in terms of language and culture,” Veronika Hegrová from the fintech startup hyponamíru confirms the current trend.
Conditions for obtaining a mortgage for foreigners
When assessing a mortgage application, each bank follows its own internal methodology. This is also the case when people with non-Czech citizenship apply for a mortgage. When a foreigner applies for a mortgage, banks are always interested in the applicant’s country of origin. “In general, banks are more benevolent towards foreigners from EU countries than in the case of applicants from other countries. Slovaks have the most advantageous position when arranging a mortgage in the long term, some banks may not even require them to provide proof of temporary residence, for example. To obtain a mortgage, they must therefore meet the same conditions as Czech citizens,” adds Veronika Hegrová.
Domestic banks most often provide mortgages for Slovaks. They are followed by applicants from Vietnam and Ukraine. In the context of the war in Ukraine, it can be expected that some people will not return to their home country and that interest in mortgages among this group will grow in the coming years.
Banks also monitor the riskiness of individual non-EU countries. Mortgage lenders maintain exclusion lists of countries from which they do not finance foreigners. Third countries such as the United States, Canada or Australia are considered risk-free. On the other hand, Morocco, Ethiopia and other African countries, Middle Eastern countries and some Asian countries such as Indonesia and Sri Lanka are among the risk countries.
Type of residence in the Czech Republic
Banks also monitor the type of residence of foreign nationals. Foreign nationals living in the Czech Republic may have permanent, temporary or long-term residence. Veronika Hegrová adds: “Foreigners who have obtained a permanent residence permit in the Czech Republic generally have the most advantageous position when dealing with the bank. However, it is also possible to obtain a mortgage without it. Foreigners from EU countries may be able to obtain a mortgage with only a temporary residence permit, or it may be replaced by permanent employment in the Czech Republic for two to three years. For foreigners from outside the EU, banks usually want permanent residence, but sometimes a long-term residence permit may be sufficient. It depends on the approach of the particular bank.”
Stricter conditions for obtaining a mortgage
When approving a mortgage, one of the main parameters considered is the amount of income. In the case of foreigners, apart from the amount of income itself, the country from which they come is also important. It is easier for foreigners who have their main source of income from the Czech Republic to obtain a mortgage. Banks always thoroughly check any income from abroad. “Foreigners applying for a mortgage are usually slightly disadvantaged by a higher LTV, which can be capped at 70 or 80 per cent, for example. Again, it depends on the approach and methodology of the particular bank,” says Veronika Hegrová.
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