Your parents can secure your mortgage with their own house or flat. Banks call this additional collateral (dozajištění): besides the flat you are buying, a second property is pledged for your loan. Your parents do not become borrowers or guarantors. They owe the bank nothing, prove no income and their age does not matter, but they do put up a specific property that the bank can sell if you stop repaying.
In return the bank calculates LTV from the combined valuation (odhad) of both properties, so you meet the ČNB limit of 80 % (90 % under 36) even when borrowing the whole purchase price. The collateral can be released later if the contract allows it and the LTV on the flat alone falls below the bank's threshold, typically 80 %. On a CZK 5 million mortgage over 30 years that may happen after 5 years, or only after 10 (calculation below).
Pledgor, guarantor or co-borrower?
In everyday Czech the verb “ručit” covers three legally different roles, and parents should know exactly which one they are signing up to:
| Role | Owes the bank? | What they can lose | Prove income? |
|---|---|---|---|
| Co-borrower (spoludlužník) | yes, the full amount | all their assets and income | yes, it is counted |
| Guarantor (ručitel) | yes, if the borrower does not pay | all their assets and income | yes |
| Pledgor (zástavce), i.e. additional collateral | no | only the pledged property | no |
Guarantors are rare in mortgages today. Additional collateral is the narrowest role parents can take on, but the risk of losing the house is real and should not be played down.
What does pledging a second property make possible?
Say you are buying a flat for CZK 5,000,000 with no own funds, and your parents pledge a house valued at CZK 4,000,000. The bank sees a CZK 5 million loan against CZK 9 million of collateral, an LTV of 55.6 %. That clears the 80 % limit easily and puts you in the low-LTV band, where rates are better than for loans above 80 %.
A second property solves security, not income. The payment on CZK 5 million over 30 years at 5.00 % is CZK 26,841, and at the banks' usual internal threshold of 45 % for loan payments that means a household net income of about CZK 59,700. If your income falls short, no amount of collateral helps; you need a co-applicant.
If at least one applicant is under 36, the LTV limit is 90 %, so on a CZK 5 million flat you are only CZK 500,000 short without the extra pledge. That sum is often easier to find another way (see the alternatives below) without putting your parents' house on the line.
What your parents sign, and how it ties their hands
- A pledge agreement (zástavní smlouva) over their property. If the house is community property of spouses, both parents sign. The lien (zástavní právo) is entered in the land registry (katastr) for a CZK 2,000 fee, and the bank orders a second valuation costing CZK 3,000–6,000.
- A ban on disposal and encumbrance, which banks usually have registered together with the lien. Your parents then cannot sell the house, give it away or borrow against it without the bank's consent.
- Property insurance with an insurance assignment (vinkulace) to the bank, so that after a fire or flood the payout goes to the bank first.
- A clean property. Banks generally refuse a house that already carries another lien, and routinely say no to a second-ranking one.
Think about siblings too. If a parent dies before the collateral is released, the house is inherited with the lien for your loan still on it, so agree within the family in advance, ideally in writing.
What happens if you stop repaying
The bank first sends reminders, then it can call in the whole loan. If the debt is still not settled, it recovers the money from the collateral, and contracts usually let the bank choose which property to sell. Your parents cannot insist that your flat goes first. For retired parents that can mean losing their home over a debt that is not theirs.
Ways to reduce the risk:
- take out payment protection insurance or risk life insurance for the loan amount;
- keep a reserve of at least several payments;
- give your parents access to information about the loan (a power of attorney or an arrangement with the bank), so they hear about a problem early and not from a final reminder;
- if you run into trouble, talk to the bank straight away. A payment holiday or a longer term costs less than selling the collateral; the options are in I can't repay my mortgage.
When is your parents' house released?
The bank releases the second property once the LTV on your flat alone drops below the threshold in the contract, usually 80 %. Without an explicit release clause you have no right to it, and the bank can keep the collateral until the end of the term. Three things get you there: regular repayments, an extra repayment and a new valuation of the flat if its price has risen.
Balance of a CZK 5,000,000 mortgage over 30 years at 5.00 %, and the resulting LTV on the flat:
| After years | Loan balance | LTV at a flat value of CZK 5.0m | LTV at a new valuation of CZK 5.5m |
|---|---|---|---|
| 0 | CZK 5,000,000 | 100 % | – |
| 3 | CZK 4,767,000 | 95.3 % | 86.7 % |
| 5 | CZK 4,591,000 | 91.8 % | 83.5 % |
| 7 | CZK 4,397,000 | 87.9 % | 80.0 % |
| 10 | CZK 4,067,000 | 81.3 % | 73.9 % |
| 11 | CZK 3,946,000 | 78.9 % | 71.7 % |
Ideally, ask for the release towards the end of the fixed-rate period (fixace). You are negotiating new terms anyway, so you can combine the release with the refixation, or move the mortgage to another bank with only the flat as collateral.
Can you move the mortgage to another property?
Yes, if the bank agrees. Replacing one pledged property with another is called a change of collateral (záměna zástavy): the bank releases the property it holds and accepts a different one, for example when your parents want to sell their house and offer a flat instead. You have no right to it, because it changes the pledge agreement, and that needs both sides to agree.
The bank has the new property valued (CZK 3,000–6,000) and recalculates the LTV from the new valuation. You sign a new pledge agreement; registering the new lien in the land registry costs CZK 2,000 and deleting the old one another CZK 2,000. Any fee for changing the contract follows the bank's price list. One mortgage secured on two properties, on the other hand, is common: that is exactly how additional collateral works.
Alternatives to pledging your parents' house
| Solution | What it means for the parents | When it makes sense |
|---|---|---|
| A gift of money towards your own funds | they lose savings, the house stays free; a gift between parents and children is exempt from tax | the parents have cash and do not want to risk their home |
| Parents as co-borrowers | they owe the whole mortgage and their income is counted; banks' age limits restrict this | you lack income, not collateral |
| A building savings loan (stavební spoření, the state-supported housing savings scheme) for the missing part | no risk to them, but you repay two loans at once | you are tens to hundreds of thousands short and your income can carry both payments |
| Additional collateral only for as long as necessary | a pledge with a clear release condition in the contract | you have no own funds at all and the parents have an unencumbered property |
Routes to a mortgage without a deposit are compared with figures in a separate article, and the technical edge cases are in 100 % LTV mortgage.
Sources
- ČNB – macroprudential policy: LTV limit 80 % (90 % under 36)
- Act No. 89/2012 Coll., the Civil Code, § 1309 et seq. (lien)
- Act No. 257/2016 Coll., on consumer credit, as amended with effect from 1 Sept 2024 (extra payment of up to 25 % of the loan amount a year free of charge)
- Act No. 586/1992 Coll., on income taxes, § 10(3)(c) (exemption of gratuitous income from relatives in the direct and collateral line)