Pre-mortgage loan

When will you need one?

In three situations that have one thing in common: the security doesn't exist yet, or can't be registered.

• A new build before completion approval. A flat from a developer is only entered in the Land Registry once finished, so there is nothing to secure until then.
• A cooperative flat before transfer into personal ownership. A share in a cooperative isn't a property; we cover this on the Mortgage for a cooperative flat page.
• A council flat under privatisation. The same logic: you're buying something that is only transferred to you later.

The common factor is timing. You have to put up the money before you become the owner, and a bank won't give an ordinary mortgage without security.

For how long will I get it?

Roughly two years. Česká spořitelna speaks of the follow-on mortgage being secured by a charge over the property within two years at the latest, Raiffeisenbank of at most twenty-four months.

This is the most common place where things go wrong. With a developer's build, the completion date commonly slips, and with a cooperative the decision rests with the members' meeting, not you. So it doesn't pay to cut the deadline fine.

What will the bank ask of you?

Proof that the transfer is genuinely coming. From a cooperative, a written promise; for a new build, the contract with the developer and a completion date.

Without that it's just an assertion, and the bank won't build a loan on it. A cooperative that isn't considering a transfer into personal ownership won't issue such a document, and that's where this route ends.

Why does it cost more than a mortgage?

Because during this period the bank has no security. It carries more risk, and prices that into the rate.

At some banks, only interest is paid during the bridging period, and the principal only starts being repaid once it rolls into the mortgage. This isn't a market rule, it's a specific bank's condition, so have it confirmed in the contract before you build a budget around it.

Does every bank offer it?

No. Komerční banka states on its website that it does not currently provide it, and its internal methodology speaks of discontinuing its sale.

This is exactly the kind of condition worth finding out before you sign a reservation agreement. If the bank you're counting on won't give you a pre-mortgage loan, what's left is security over another property or an unsecured loan, and either changes the whole budget.

What if I don't get one?

Two routes, both of which can be worked out in advance.

Either you put up another property you own outright as security, even one belonging to someone else; we cover this under the Charge over the property entry. Or you take an unsecured home loan, which has a lower cap, a shorter term and costs more. It makes most sense when you're paying a larger part of the price yourself.