American mortgage (americká hypotéka)
An American mortgage is a non-purpose loan secured by a lien (zástavní právo) on a property. You can spend the money on anything, and the bank does not normally ask for proof of purpose. It costs more than a purpose-bound mortgage, and banks lend a smaller share of the collateral's value. How much they lend, for how long and what it costs is covered in our guide to the American mortgage.
Example
Assuming a rate of 6.50 %, a loan of CZK 1,000,000 over 20 years costs CZK 7,456 a month, whereas a purpose-bound mortgage at 5.00 % costs CZK 6,600. Over 20 years that comes to roughly CZK 205,000 more in interest.
In practice
Under § 15(3) and (4) of the Czech Income Taxes Act, you can deduct interest on a non-purpose loan only on the part you demonstrably spend on housing. The rest gets no deduction. The bank wants the same valuation (odhad), pledge agreement and land registry (katastr) entry as for an ordinary mortgage.
How it differs
A purpose-bound mortgage serves housing only and you prove the purpose, which is why it is cheaper. Consolidation into a mortgage is a special case in which the non-purpose part pays off other loans.
Related terms
In-depth guide
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