Consolidating loans into a mortgage: a lower payment, but more interest

Consolidating loans into a mortgage (konsolidace půjček) saves money only if you use the lower rate to repay faster, not to pay less each month. Move CZK 600,000 of consumer loans at 12 % with 3 years left into a mortgage at 6 % over 25 years, and the monthly payment drops from CZK 19,929 to CZK 3,866.

The interest, however, rises to CZK 559,743 instead of CZK 117,429, almost five times as much at half the rate.

In practice this means increasing your existing mortgage (navýšení hypotéky), refinancing with an increase (ideally at the end of the fixed period), or an American mortgage (americká hypotéka, a non-purpose loan) secured by property you already own. You need free room under the LTV limit, which the ČNB sets at 80 % of the property value (90 % for applicants under 36), and income the bank recognises.

In October 2026 the average rate on new mortgages is 5.00 % (ČBA, August) and bank offers are rising, but the gap against consumer loans is still wide. What counts is what you do with it.

How can you move loans into your mortgage?

• Increasing the mortgage with your current bank. The bank adds a further loan or an addendum to the existing mortgage. It is the simplest route, often without a new entry in the land registry if the pledge agreement also covers future claims. The catch is that the price is set by a bank that knows you have nothing to compare it with.
• Refinancing with an increase. A new bank pays off the existing mortgage and the consumer loans. This is penalty-free only at the end of the fixed period or within 3 months of the new rate being announced; during the fixation the current bank may charge up to 0.25 % for each started year until the end of the fixation, max. 1 % in total.
• An American mortgage. This is a non-purpose loan secured by property you own outright or with a small mortgage on it. The rate is usually higher than on a purpose mortgage, and banks lend at a lower LTV. Our article American mortgage: truths and myths covers the rest.

Whichever route you take, the bank usually pays the consumer lenders directly and wants proof that the loans are closed. Cancel your credit cards and overdrafts afterwards. Otherwise the bank keeps counting them as commitments, and the road to new debt stays open.

Can you increase your mortgage to pay off loans?

Yes, if the whole new loan fits under the LTV limit of 80 % of the property value, or 90 % for applicants under 36. Refinancing that does not raise the principal falls outside the ČNB limit, but once you add money for the loans, the whole new amount is tested (§ 45a of the Czech National Bank Act), against the bank's new valuation rather than the price you once paid.

A flat valued at CZK 5,000,000 with a CZK 3,200,000 mortgage balance therefore allows an increase of at most CZK 800,000. The bank also reassesses your income, and on the part that repays loans rather than paying for housing it may charge a higher rate or lend less.

CZK 600,000 of loans in five variants

Assumption: consumer loans totalling CZK 600,000 at an average 12 % with 3 years left to run. For the consolidated part we use 6 %, the upper edge of today's individual mortgage offers of around 5.8 % plus the surcharge banks usually add for the non-purpose part.

The repayment period decides the outcome, not the rate. Even stretched to just 7 years at half the interest rate, consolidation costs more interest than the original loans. You save only if you repay the consolidated amount about as fast as the original loans would have been repaid.

How Petr turns consolidation into a saving, and what it costs

Without that discipline, if the difference simply melts into the household budget, a lower payment has been bought with more than CZK 440,000 of extra interest. Our article Extra mortgage payment explains how to make one correctly.

Budget for these costs before you start:

• Valuation: CZK 3,000–6,000 (for flats some banks do it online, cheaper or free).
• Application for registration of the lien in the land registry: CZK 2,000, if a new lien is needed.
• Early repayment of the consumer loans: for fixed-rate loans the lender may ask for compensation of its costs, which the Consumer Credit Act caps at a fraction of the amount repaid (at most 1 %, or 0.5 % if no more than a year remains until the agreed end of the loan). Check your contracts in advance.
• A penalty on the existing mortgage if you refinance during the fixed period: 0.25 % for each started year until the end of the fixation, max. 1 %. On CZK 3,200,000 with 2 years of fixation left, that is up to CZK 16,000.
• Taxes: you generally cannot deduct interest on the part used to repay consumer loans. The deduction of up to CZK 150,000 a year applies only to a loan for your own home, though a loan that demonstrably financed housing, such as a renovation, may be an exception.

What the bank will look at

For the bank, consolidation is a new application, and three things decide it:

1. LTV. The whole loan secured by the property, consolidated part included, must meet the ČNB limit of 80 % (90 % under 36). Banks tend to be stricter on the non-purpose part and lend less. For an investment flat, the ČNB has recommended LTV of at most 70 % and DTI 7 since 1 April 2026.
2. Income. Consolidation improves your payment-to-income ratio, because the bank counts the new, lower payment. The usual internal DSTI threshold is 45 % (50 % under 36); the ČNB has not required this limit since 1 July 2023.
3. Repayment history. People who have consumer loans because they cannot keep up often have arrears in the register. With a fresh negative record the bank will often refuse consolidation or offer worse terms. If you then look at a non-bank mortgage, check the lender in the ČNB register and compare the APRC (RPSN), not the rate.

If you can no longer manage the payments and the bank has refused consolidation, do not solve it with another loan. Our article I can't repay my mortgage: what to do sets out the steps.

When consolidation makes sense, and when it does not

It makes sense when:

• you have expensive loans or credit cards at a high rate, and a stable income;
• there is enough free LTV in the property and you can refinance penalty-free at the end of the fixed period;
• you will send the saved difference to the bank as extra payments;
• the loans have more than a few months left to run, otherwise the costs will not pay back.

It does not make sense when:

• you would repay the loans within a year anyway, so the valuation and registration would eat almost all the saving;
• you would “stretch” repayment to 25–30 years and spend the difference;
• the debts come from spending permanently above your income, in which case consolidation only moves the problem onto your home, which you could lose at the next drop in income;
• during the fixed period, penalties and fees would exceed the interest saved.

Put both versions, with and without consolidation, side by side in the Compare two mortgages calculator, including fees for the whole repayment period.