Additional collateral (dozajištění)
Establishing a lien (zástavní právo, § 1309 of the Civil Code) over another property besides the one being bought, to lower the LTV or to secure a loan for something that cannot be pledged on its own. The other property may belong to the borrower or to a third party, typically parents, who become pledgors. LTV 80 % (90 % under 36) is calculated from the combined collateral value. Getting it released is covered in parents' house as collateral.
Example
A flat costs CZK 5,000,000 and the mortgage is CZK 4,500,000. An LTV of 90 % is over the limit for applicants aged 36 and above. The parents add their house, valued at CZK 3,000,000, as collateral, bringing total collateral to CZK 8,000,000 and the LTV down to 56 %. At 5.00 % over 25 years the payment is CZK 26,307, and the parents' house stays encumbered until it is released.
In practice
The pledged property is valued, the pledgor signs a pledge agreement and a further application for entry (návrh na vklad) goes to the land registry (CZK 2,000). Parents should understand that if the loan is not repaid, the bank can sell their house. Agree in advance when, and on what terms (LTV, number of years), the bank will release the extra collateral, or you will have nothing to hold it to later.
How it differs
A guarantor is liable with all their assets; a pledgor only with the pledged property, and does not become a debtor. Release of collateral is the reverse step, freeing the extra property once the bank no longer needs it. Until then the house can hardly be sold or pledged again without the bank's consent.
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