Loan agreement (úvěrová smlouva)
A contract by which the bank undertakes to provide money and the client to repay it with interest (§ 2395 of the Civil Code). For consumer mortgages Act No. 257/2016 Coll. applies, and the contract states the rate, fixed period, APRC (RPSN), payments, drawdown conditions and penalties. Before signing, the consumer has a 14-day reflection period in which the bank may not change or withdraw its draft (§ 111).
Example
An agreement for CZK 4,000,000 over 25 years with a 5-year fixed period at 5.00 % will show a payment of CZK 23,384, total interest of CZK 3,015,080 if the rate never changes, the APRC and the conditions attached to rate discounts. It will also make drawdown conditional on the lien being registered, or on proof that the application for entry has been filed.
In practice
The statutory right to withdraw within 14 days of signing (§ 118) does not apply to housing loans.
Ask for the draft agreement in advance, together with the pre-contract information, and go mainly through the drawdown conditions, the penalties for breaching discount conditions and the deadlines for supplying documents. The bank must assess your creditworthiness before signing; if it fails to, the contract may be invalid. Look out especially for the date by which the loan must be drawn, which people who read only the rate and the payment tend to miss.
How it differs
A pledge agreement creates security over the property, while the loan agreement creates the debt itself; a mortgage needs both. A building savings (stavební spoření) loan agreement or a pre-mortgage loan is a loan agreement of a different type, though the Consumer Credit Act governs those too.
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