Renovation loan (úvěr na rekonstrukci)
A renovation loan finances the repair, modernisation or conversion of a home. It can take the form of a purpose mortgage secured by property, a building savings (stavební spoření) loan or an unsecured consumer loan. For owner-occupied housing, the interest can be deducted from the tax base under § 15 of Act No. 586/1992 Coll., on income taxes, up to CZK 150,000 a year for loans taken out from 2021 onwards.
Example
A flat owner borrows CZK 1,000,000 for a complete renovation with a mortgage over 30 years at 5.00 %. The payment is CZK 5,368 a month. In the first year he pays roughly CZK 49,700 in interest, which he deducts from his tax base, saving about CZK 7,400 at a 15 % tax rate. An unsecured loan for the same amount would have a higher rate and a much shorter term.
In practice
For a renovation mortgage the bank wants a budget, a project or building notification (ohlášení stavby) for larger works, and a valuation of the property as it will be once the works are finished. It pays out in stages against invoices, so tradespeople paid in cash without receipts can hold up the next tranche. If you are buying and renovating at the same time, cover both with a single mortgage.
How it differs
An American mortgage (americká hypotéka) is non-purpose: the money can go on anything, but the rate is higher and there is no tax deduction. A subsidy such as Nová zelená úsporám (state energy-saving grant) does not have to be repaid, unlike a loan, and the two are often combined.
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