You can get a mortgage for land in the Czech Republic if it is a building plot: the zoning plan (územní plán) allows building on it and there is access to it. Banks are less willing to lend on bare land, though, and often lend a smaller share of its value than the ČNB's 80 % limit allows (90 % under 36).
A single mortgage for the plot and the house is usually the better deal, because the plot then counts towards your own funds. Interest on a mortgage for a plot is tax-deductible only if you start building a house or flat to live in within 4 years of acquiring it (§ 4b of the Income Tax Act). Otherwise you pay back the tax on the interest you have already deducted. Before you sign a reservation and pay a deposit, go through the seven checks below.
What should you check before buying a plot with a mortgage?
Seven things, before you sign a reservation and pay a deposit:
- The municipality's zoning plan. Is the plot in an area designated for building, and what are the rules, such as the height of the house or the share of the plot that can be built on? The zoning plan is on the municipality's website; a binding statement comes from the planning authority.
- The title deed extract (list vlastnictví). Who owns the plot and what is in parts C and D: charges, easements, pre-emption rights, notes about enforcement or a dispute. You can view it free of charge in the ČÚZK's online land registry viewer.
- The type of land. Arable land, garden or permanent grassland belongs to the agricultural land fund (zemědělský půdní fond, ZPF). Before building, the plot has to be taken out of the fund, usually for a levy.
- Access from a public road. Either the plot adjoins the road directly, or access runs across someone else's land under a right of way entered in the land registry.
- Utilities. Water, sewerage, electricity and possibly gas. Ask the network operators for a statement on what the connections will cost and whether they have capacity.
- Ground risks. Flood zone, slope, load-bearing capacity of the subsoil, radon. Flood risk maps are public; geology needs a survey.
- The municipality's conditions. A building freeze, a compulsory planning study, or a planning agreement in which the municipality asks for a contribution to infrastructure.
Any of these can mean that you buy the plot but cannot build on it, or only for considerably more money. The bank checks some of them during the valuation, but not all of them on your behalf.
Plot and house in one mortgage, or separately?
| Mortgage for the plot only | Plot and build in one mortgage | |
|---|---|---|
| What LTV is based on | the value of the plot | the future value of the house including the plot |
| Drawdown | in one go, for the purchase price | the plot at once, the build in stages against invoices |
| What else the bank wants | a valuation of the plot, often an outline of what you plan to build | a design, an itemised budget and a building permit |
| How much the bank lends | often less than 80 % of the value, under internal rules | up to 80 % (90 % under 36) of the future value |
| When it makes sense | you are buying the plot before you have a design | you have a design and want to build within a year or two |
If you buy a plot today and build in a few years' time, you will take a second loan for the build later. That is easiest with the same bank, since it already holds a charge on the plot. How a construction mortgage is drawn down, and how the value of the plot counts towards your own funds, is explained in Mortgage for building a house.
What it costs on a CZK 2 million plot
A model plot for CZK 2,000,000 (rate 5.00 %, 25-year term, annuity payment; the share the bank lends is illustrative):
- The bank lends 70 %: a loan of CZK 1,400,000, own funds of CZK 600,000, a payment of CZK 8,184.
- The bank lends 60 %: a loan of CZK 1,200,000, own funds of CZK 800,000, a payment of CZK 7,015.
- First-year interest on the CZK 1,400,000 loan: CZK 69,344. At a 15 % tax rate the deduction gives you back CZK 10,402, provided you start building within 4 years.
You pay from the first month, even though nothing stands on the plot yet. If you rent in the meantime, your budget has to carry both.
On top of the price, allow for the valuation (usually CZK 3,000–6,000), an administrative fee of CZK 2,000 to register the transfer of ownership and CZK 2,000 to register the lien. The property transfer tax was abolished in 2020.
Can you buy agricultural land and build on it?
Not until the zoning plan designates it for building and the plot is taken out of the agricultural land fund (ZPF). You will not get a purpose-bound mortgage for land that the zoning plan does not designate for building. Changing a zoning plan takes years, and nobody can guarantee it. You would have to pay for such a plot from your own money or pledge a property you already own. If the money is not for a housing need, the loan is a non-purpose secured loan, an “American mortgage” (americká hypotéka), with a higher rate and no interest deduction.
Take care, too, with a plot that carries a pre-emption right or an easement, such as utility lines running across the garden. Which easements banks accept is discussed in Easements and a mortgage.
Sources
- Act No. 586/1992 Coll., on income taxes, § 4b(1)(b) (plot, construction started within 4 years), § 15 (interest deduction)
- Act No. 283/2021 Coll., the Building Act (zoning plan, building permit)
- Act No. 334/1992 Coll., on the protection of the agricultural land fund (removal from the fund, levies)
- ČÚZK – online land registry viewer (Nahlížení do katastru nemovitostí)
- ČNB – LTV limit of 80 % (90 % under 36)