Bridging loan or mortgage? How to buy before you sell in Czechia

In Czechia a “bridging loan” (překlenovací úvěr) means one of two things. The first is a loan from a building savings bank (stavební spořitelna, a lender in the state-supported housing savings scheme, stavební spoření) that you draw straight away, before you qualify for a regular building savings loan; your savings and the regular loan replace it later.

The second is short-term finance for buying a new home before you have sold the old one, with the bank “bridging” the money the sale will release.

In the first sense the bridging loan competes with a mortgage. It wins on smaller sums, on cooperative flats and where you do not want to pledge property, while for a flat costing millions a mortgage at around 5.00 % is usually better value. In the second sense it complements a mortgage: you pay interest on the bridged amount until you sell, and the bank wants to see that you can carry both payments at once. Bridging CZK 3 million for 6–12 months costs roughly CZK 90,000–180,000 in interest (calculation below).

The building savings bridging loan, phase by phase

A building savings bank grants a regular loan only once the target amount is allocated, which means you have saved the required share and reached the required evaluation score (hodnoticí číslo). The bridging loan skips that wait:

1. Phase 1, the bridging loan. You get the full amount at once. Each month you pay interest on all of it, plus deposits into the building savings contract, but no principal yet.
2. Allocation. Once you have saved the required share and met the evaluation score, your savings pay off part of the bridging loan.
3. Phase 2, the regular building savings loan. The remainder becomes a regular loan repaid in equal monthly instalments. The rate is usually fixed for the whole repayment period, so no refixation awaits you.

Phase 1 is the expensive part. Interest on the full amount plus the savings deposit often adds up to as much as a mortgage payment, or more, and lenders count it among your loan payments when assessing creditworthiness. Compare the APRC (RPSN) and the total you will pay over both phases, not the headline rate; the difference is explained in APRC vs. interest rate.

When do building savings win over a mortgage?

On small sums, a mortgage's fixed costs weigh more. A CZK 800,000 mortgage at 5.00 % costs CZK 4,295 a month over 30 years, or CZK 5,280 over 20, yet you pay for the valuation and lien registration just as you would on CZK 5 million, and the pledge process takes weeks. A building savings bank needs none of this for smaller unsecured loans.

A building savings bridging loan therefore makes sense for a renovation costing hundreds of thousands, for buying a cooperative flat (a cooperative share cannot be pledged) or for topping up your own funds. For a flat at CZK 4–5 million, a mortgage usually comes out ahead. How to combine the two is covered in Building savings and a mortgage.

How do you buy a new home before you sell the old one?

The second meaning covers a different situation. You have found a house, but your money is tied up in your current flat; the seller will not wait and you do not want to sell under pressure. Banks offer two solutions:

• One larger mortgage secured on both properties. The bank also lends the part you will later pay from the sale and takes both the new and the old property as collateral. The contract says that after the sale you pay in the proceeds as an extra repayment without a fee, and the loan is recalculated.
• A separate short-term loan for the period of the sale, usually 1–2 years, on which you pay only interest. Few banks offer it, and the rate tends to be higher than on a standard mortgage.

Either way, three conditions apply. Total LTV across all the collateral must stay within the ČNB limit of 80 % (90 % under 36). Your income must carry every payment at once: the new mortgage, the bridge and the old mortgage until the flat is sold. And the bank will want to know when and for how much you expect to sell; if the sale drags on, it may push for a lower price or a recalculated loan.

The old mortgage can be repaid from the sale price without a fee if at least 24 months have passed since it was signed. Before that, the bank may charge at most 0.25 % for each started year left in the fixed-rate period (fixace), and no more than 1 % of the amount repaid in total. Selling a mortgaged flat is covered in a separate article.

A CZK 8 million house bought before the flat is sold

Bridging pays off if the flat sells quickly, and above all if it spares you a rushed sale. A 1 % discount on a CZK 4 million flat is CZK 40,000, and people selling under pressure often give away more than that.

If your income cannot carry both payments

• Sell first and rent for a while. This is the safest option, with no double borrowing; in Prague a 2+kk rents for around CZK 20,000–26,000 a month.
• Sell with a deferred handover. The buyer pays into escrow and you stay in the flat for a few more weeks or months under an arrangement in the purchase agreement or a lease, so you have the sale money before you move.
• Negotiate a longer reservation on the new property. Developers and some private sellers will agree to a reservation period long enough to cover your sale.
• Synchronise both transfers. The purchase agreements for the flat and the house are signed within days of each other, and the buyer's money goes from escrow straight towards the price of the house. A lawyer needs to coordinate both escrows.

Which one fits your situation

• Under a few hundred thousand, a cooperative flat or renovating a rented flat: a loan from a building savings bank, compared on APRC.
• A flat or house costing millions, with a property to pledge: a mortgage. In phase 1 a building savings bridging loan would cost you more each month.
• Buying before you sell, with income that covers all payments at once: a mortgage secured on both properties, with the right to pay in the sale proceeds without a fee.
• Income that will not stretch to all the payments: a sale with deferred handover, or selling and renting in between.
• An old mortgage less than 24 months old: allow for the early repayment fee (at most 0.25 % per year left in the fixed period, 1 % in total), or ask about moving the loan to the new property.