Mortgage Prepayment Penalties in the Czech Republic

The rules for calculating the penalty for early mortgage repayment are not yet uniform in the Czech banks. However, this situation is to be changed by new amendments to the Consumer Credit Act, which currently lie in the Chamber of Deputies Parliament of the Czech Republic. The aim of both proposals is to unify the rules for calculating the fee related to early mortgage repayment and to define the maximum possible amount of the penalty.

According to the first proposal, the amount of reimbursement of costs for early repayment of a consumer loan for housing (i.e. a mortgage) could not exceed 3% of the early repayment part of the total amount of the loan. The second proposal suggests only 1.5%.

At present, the fee for early repayment can range from units of thousands of crowns to tens of thousands CZK. However, the legislative change would bring clear rules for determining the amount of the fee which might lead to penalty increases in some of the banks with current small fees. In this regard fee capping should balance the protection of the rights of consumers and creditors, on the contrary, it will not be a compensation for lost profits.