Mortgage for a flat
On paper it's the same mortgage as for a house. The difference is what the bank looks at: for a flat it checks the unit, the building it stands in, and the owners' association. On the other hand, valuation is often done from a desk, without a site visit from a surveyor, which saves time and money.
What exactly is given as security?
The flat unit, together with a share in the building's common parts. You're not buying square metres bounded by walls; the unit comes together with a share in the roof, the staircase, the risers, and usually the land as well.
That's why the bank cares about the building as a whole, not just your flat. For a detached house, by contrast, it's the land and the permits that matter; that's covered on our page Mortgage for a house. The condition of the roof, and whether the building has been insulated, feed into the value of the security, even though that seems to have nothing to do with your unit at first glance.
A cooperative flat is a completely different case: there you're not buying a unit, but a share in the cooperative, and that can't be given as security. We cover this on our page Mortgage for a cooperative flat.
Valuing a flat is often done from a desk
For flats in ordinary developments, banks can value them online. No surveyor comes out, the price is set from data on sales in the area, and you save the fee as well as the wait for a visit.
It does come with conditions, though, and it's worth knowing them in advance. Komerční banka's internal guidance states that completing an online valuation needs proof of the flat's floor area and at least two photographs, the flat's interior and the building. These are one bank's rules, not the market's, but others don't differ from them dramatically.
You don't need to get proof of floor area from an authority. The acquisition title, the owner's declaration, a service-charge statement from the manager, a tenancy agreement, an insurance contract or a tax return are all accepted. A valuation drawn up by another bank is also accepted, regardless of its age. If you have nothing, the bank will download the owner's declaration from the Land Registry itself.
The trap people hit most often: floor area without the balcony
The floor area doesn't include the balcony, the terrace or the cellar. The bank works with the flat's net floor area. A listing usually states the area including the balcony, because it sells the flat better.
The difference only shows up at the verification stage, and the tolerance there is narrow. Komerční banka allows a deviation of at most 1.5 m², and at the same time at most 3% of the floor area stated in the document. When the difference is bigger, the valuation has to be redone with the correct floor area.
In practice, this leaves one rule: don't report the bank the figure from the listing. Take it from the owner's declaration or the purchase agreement. It saves you an extra round at the worst possible moment, namely while the deadlines from the reservation agreement are running.
And bear in mind that even after an online valuation, a surveyor may still contact you about a site visit. Under KB's internal guidance, in that case the bank pays for it, not you. How valuation prices differ between banks is on our page Property valuation.
What does the bank care about in the owners' association?
Mainly whether the building has a problem that will sooner or later feed into the value of the flat. It asks about the technical condition, any planned major repairs, and whether the association itself is repaying a loan.
So ask the seller these questions before the bank does: how much is in the repair fund, what's planned, and whether the building is repaying a loan for insulation work. The answer doesn't only affect whether the mortgage gets approved. It mainly affects your monthly costs, which aren't part of the repayment and which you'll be paying regardless.
Does a right of use stop a mortgage?
Not on its own. A number of websites say a property with a charge over it for someone's right of use can't be financed. It isn't that simple: what matters is what kind of right it is, and whether it's registered in the Land Registry as a right in rem.
Under its internal guidance, Komerční banka doesn't accept a right of use or a right of residence registered on the title as a right in rem. It does make an exception, though. If the right only concerns a defined part of the property, say one flat in the building or specific rooms, and the surveyor sets a reduced price because of it, it will go through.
And when the right of use is agreed only as a contractual obligation, so it isn't a right in rem and isn't registered in the Land Registry, it can be accepted under further conditions.
One piece of advice follows from this. Before signing a reservation agreement, download the title extract and check what's registered against it. It costs a few crowns and saves a last-minute surprise. What to look for there is covered under our entry Charge over the property (lien).
Frequently asked questions
Do I need the owners' association's consent for a mortgage on a flat?
Not to buy a flat held in private ownership, the unit is yours and you give it as security yourself. The association's consent comes into play for loans concerning the building as a whole, typically a renovation of the common parts. The bank may still ask for information about how the association manages its finances, especially if the building is repaying its own loan.
Why does the bank want photos of the flat?
Because of the online valuation. Without a surveyor's visit, it needs at least a basic picture of the condition, so you supply the flat's interior and the building from outside. It's a faster and cheaper option than a surveyor's visit, and today it's the standard for flats in ordinary developments.
What if the floor area in the Land Registry differs from the listing?
The figure from the document applies, not the listing. The bank works with the net floor area, excluding the balcony, terrace and cellar, and the tolerance is narrow. When the difference is bigger, the valuation is redone, which costs time. So report the bank the figure from the owner's declaration or the purchase agreement.
Is a mortgage for a flat cheaper than for a house?
The rate isn't set by the type of property, but by your creditworthiness and LTV. A flat tends to come with lower incidental costs, though, because valuation is often done online and you don't have to pay a surveyor. So the difference is in the costs around the mortgage, not in the rate itself.
Will a bank lend on a flat in a prefabricated apartment building?
Yes, this kind of development is routine for banks, and for an online valuation it's actually the most common case. Watch out more for very small flats and for buildings in poor technical condition; there, the value of the security can differ from the price you've agreed on.