Purpose-bound mortgage (účelová hypotéka)
A mortgage that can be used only for housing: buying, building or renovating a home, or paying off an earlier housing loan. The client proves the purpose with a purchase agreement, a budget or invoices, and the bank usually pays the seller or supplier directly. It tends to be cheaper than a non-purpose American mortgage. The interest deduction under § 15 of the Income Taxes Act applies only to a loan used for your own housing.
Example
On a loan of CZK 4,000,000 over 25 years, a purpose-bound mortgage at 5.00 % works out at a payment of CZK 23,384. Suppose a non-purpose one cost 6.00 %: the payment would be CZK 25,772, CZK 2,388 a month more. Interest in the first year comes to about CZK 198,000; at most CZK 150,000 can be deducted from the tax base, and at a 15 % rate up to CZK 22,500 comes back.
In practice
The purpose has to be documented by the end of the drawdown period; for a renovation the bank wants a budget and later invoices or photographs. It will not release money for an undocumented purpose. If you need part of it for other spending, ask about combining it with a non-purpose part, which usually carries a higher rate. A purpose-bound mortgage will not pay for a car or the furniture for your flat.
How it differs
An American mortgage is non-purpose: you can use the money for anything, but the property is still pledged. An investment mortgage is also purpose-bound, except that it finances a flat to let, and since April 2026 the ČNB has recommended a stricter LTV of 70 % for it. The interest deduction does not apply to it, because it is not your own home.
Frequently asked questions
Can you get a mortgage for a garage?
Legally it can work: a garage registered as a unit is immovable property that can carry a lien, and a loan to buy real estate counts as housing credit under the Consumer Credit Act. Whether a bank finances a garage bought on its own is its own decision, so ask before you count on it.
What can a Czech mortgage be used for?
Buying, building or renovating a home, buying a building plot or a cooperative share, and repaying an earlier housing loan. You prove the purpose with a contract, budget or invoices; for anything else, such as a car, you need a non-purpose American mortgage.
Can a mortgage repay a purchase you already paid?
Some banks allow it: mBank, for example, will reimburse a purchase price you have already paid (zpětné proplacení). Ask your bank about its conditions and deadline before you pay from your own money.
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