Mortgages are not the only means of purchasing a home in the Czech Republic. Increasingly, developers and homebuyers are turning to družstevní byty, or cooperative apartments, as an alternative option that offers unique advantages.

Cooperative apartments are acquired through cooperative societies that secure loans from banks to finance the construction of the buildings. Buyers become members of the cooperative by contributing around 20% of the purchase price, while the remaining amount is repaid to the cooperative. It is important to note that cooperative apartments are not necessarily cheaper than individually-owned properties.

Currently, there are approximately 140,000 družstevní byty in the Czech Republic, with the majority consisting of older apartment buildings from the 1990s that have not yet been converted to individual ownership. However, new cooperative apartments are being developed in major cities such as Prague, Brno, Liberec, and Pilsen. Although the number of suitable new apartments is relatively limited, there is a growing interest in this type of housing.

One advantage of družstevní byty is the typically lower interest rate compared to traditional mortgages. Additionally, the repayment period can be extended, making monthly payments more affordable for homebuyers. However, it is important to note that cooperative apartments cannot be mortgaged in the traditional sense, as the cooperative society owns the building, not the individual unit. Instead, cooperative members must provide collateral in the form of another property or opt for a loan specifically tailored for cooperative apartment buyers.

While the process of purchasing a družstevní byt differs from that of a traditional mortgage, it remains a viable option for prospective homebuyers in the Czech Republic. With the construction of new cooperative apartments on the rise, an increasing number of homebuyers are considering this alternative to traditional mortgages.

When comparing cooperative apartments to traditional mortgages, it is essential to note that cooperative apartments may not necessarily be cheaper, especially in the case of new construction. Developers may require a down payment of 20% or more, making the initial cost comparable to that of individually-owned properties. However, the lower interest rates and extended repayment periods of cooperative apartment loans can make monthly payments more manageable for some buyers. Additionally, cooperative apartments can be an attractive option for individuals who do not qualify for traditional mortgages due to a lack of collateral or a less-than-perfect credit history.

Looking ahead, as more new cooperative apartments are built and existing ones are converted to individual ownership, the availability and popularity of cooperative apartments are expected to increase in the Czech Republic. This alternative to traditional mortgages offers unique advantages for homebuyers, making it a viable and appealing option for those in search of a new home.

Article by Prague Forum