Mortgages and financing

American mortgage (americká hypotéka)

In Czech: Americká hypotéka

An American mortgage (americká hypotéka) is a non-purpose loan secured by a lien on property. The money can be used for anything, such as a car or paying off other debts, but your property serves as collateral.

Also called: non-purpose mortgage, home equity loan, neúčelová hypotéka

What it means

An American mortgage (americká hypotéka) is a loan where you do not have to tell the bank what you will spend the money on. Unlike an ordinary consumer loan, it is secured by a lien (zástavní právo) on a property that the applicant or another person already owns.

The name is common in Czech practice but it is not a legal term. Banks also call it a non-purpose mortgage (neúčelová hypotéka) or a non-purpose loan secured by real estate.

How it works in the Czech Republic

The process resembles a standard mortgage: the bank assesses your creditworthiness (bonita), asks for a valuation of the pledged property and sets the collateral value. The loan-to-value ratio (LTV) is based on that figure. Ask the bank which LTV limits it applies to a non-purpose loan.

The lien arises when it is entered in the land register (katastr nemovitostí) and stays visible on the title deed (list vlastnictví) until the loan is repaid. If the borrower stops paying, the bank can recover the debt from the sale of the pledged property, even if the money went on a car or a holiday.

A non-purpose mortgage may come with different terms from a purpose mortgage, such as a different interest rate or a shorter maximum term. Compare it with other options by RPSN, which includes interest, fees and other required payments.

Practical example

For example, the owner of a flat needs CZK 600,000 to repair an inherited cottage in poor condition. Instead of a consumer loan, the owner takes an American mortgage secured on the flat. The catch is that if repayments stop, the flat the owner lives in is at stake.

What to watch out for

  • Remember that you are pledging property, often the home you live in.
  • Compare the RPSN of an American mortgage with a purpose mortgage and with a consumer loan.
  • If you pledge someone else's property, such as your parents' home, the owner must agree and understand the risk.
  • Find out whether and on what terms the loan can be repaid early.
  • Be careful with non-bank lenders offering loans secured on property; read the contract closely and check who the lender is.

Frequently asked questions

What can an American mortgage be used for?

Practically anything, because it is a non-purpose loan. You do not have to show the bank what you spend the money on.

Is an American mortgage cheaper than a consumer loan?

It can be, because it is secured by property, but it need not be. Compare the RPSN of specific offers for the same amount and term.

Can I pledge a property that already has a mortgage on it?

It depends on the bank and on how much collateral value is left. The bank will usually want to know about all existing liens, which you can see on the title deed.

  • Mortgage (hypotéka)A mortgage (hypotéka) is a long-term housing loan secured by a lien on a property. The borrower repays it in regular monthly instalments, usually over many years.
  • Lien (zástavní právo)A lien (zástavní právo) secures a debt: if the debtor does not pay, the creditor can be satisfied from the pledged property. On a property in the land register it arises by entry and stays with the property when it changes hands.
  • LTV (loan-to-value)LTV (loan-to-value) is the ratio of the loan amount to the value of the collateral, i.e. the pledged property. It decides how much of a purchase a mortgage can cover and how much you must pay yourself.
  • RPSN (annual percentage rate of charge)RPSN (roční procentní sazba nákladů) is the Czech annual percentage rate of charge: the total cost of a consumer loan expressed as a yearly percentage of the loan amount, including fees, not just interest.
  • Property valuation (odhad nemovitosti)A property valuation (odhad nemovitosti) is an assessment of a flat, house or plot that a bank relies on when deciding on a mortgage. It is used to set the collateral value and thus how much the bank will lend.

Sources

Laws and official pages this text is based on (in Czech).

This text is for information only and has not yet been checked by a legal or financial expert. It is not legal, tax or financial advice. Verify important details in the listed sources or with a professional.

Updated 25 October 2026

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