Reverse mortgages are used mainly in the USA and the United Kingdom, where they have a long history. In the Czech Republic, the term is fairly new and the banking sector has been very slow to adopt it. This is because a reverse mortgage is often seen as unethical. Let’s take a closer look at it and go through its advantages, disadvantages and the conditions for getting one.
Reverse mortgage
It is also often called an upside-down mortgage. It is a mortgage with a higher interest rate, aimed mainly at older people. So how does it work? The client puts a charge on their property in favour of the provider, and in return the provider pays them a pre-agreed amount every month. We can call it a lifetime annuity. Throughout the annuity, the client remains the owner of the property and pays no instalments, interest or monthly fees. The client can use the money received from the provider for anything.
The purpose of a reverse mortgage is to provide financial security for seniors of retirement age. Most of them have no savings and often cannot get by on their pension alone. However, many own a property they do not want to sell, and a reverse mortgage gives them the option to stay in their home and top up their income.
The debt, including interest and all administrative fees, is repaid only after the client’s death, as part of the probate proceedings. The heir repays the amount owed from their own funds or from the sale of the pledged property. If the client has no heirs, the debt is also settled through the sale of the property.
Conditions for getting a reverse mortgage
A reverse mortgage can be offered by any financial institution authorised by the Czech National Bank (ČNB) to provide housing loans. In the Czech Republic, these are banks, credit unions and credit companies.
To get a reverse mortgage, the client must first go through an approval process. The minimum age for the mortgage is 60. The senior must own a property (a cooperative flat cannot be pledged). If the house is owned by a married couple, the client must also provide the consent of their spouse. The property must not be subject to enforcement (exekuce) (unless the loan will be used to pay it off), and the client must live in the property.
The property must be located in the Czech Republic and must not be subject to any property disputes. It must also be in good condition, and it must be reasonable to expect that its value will not fall significantly.
During the approval process, the client’s total income and expenses are assessed. The main income is considered to be the state old-age pension (starobní důchod), which may be supplemented by extra earnings or passive income. Expenses include all household costs, the cost of covering basic living needs and repayments of financial commitments.
The financial company sets the amount of the annuity based on the value of the property and the client’s age. In general, the older the client and the more valuable the property, the higher the annuity the client receives.
Documents needed for a reverse mortgage
What documents do we need?
- Proof of identity,
- proof of title (purchase contract),
- proof of the amount of the state old-age pension received and other income,
- documents relating to financial commitments (loan agreement).
Disadvantages of a reverse mortgage
There are several reasons why a reverse mortgage is seen as a controversial product.
- The property we pledge remains encumbered for the rest of our life. This means we cannot freely deal with the property without the provider’s consent. We cannot sell it, renovate it as we wish, give it away or use it as security for our children’s mortgage.
- Once we get on this train, it is not easy to get off. This is especially true if we no longer have the money already paid out to us. In addition, the fees for terminating the contract are high.
- The interest is higher than on a standard mortgage. We must therefore bear in mind that after our death this interest will eat up a lot of money, and very little of the property’s value will be left for our children.
- We must not leave our home for more than 6 months, and we must look after it properly so that its value does not fall. This means paying the insurance properly and covering all necessary repairs.
The ideal client for a reverse mortgage is a senior with no heirs. It is not unusual for heirs to expect to inherit the client’s house after their death, even if the subject has never been discussed. They may want to rent it out, or sell it and pay off their own mortgage. We must therefore take this possibility into account and discuss the whole matter with our children, above all so that family relationships are not damaged.
Higher age = larger loan
The loan amount is set according to the value of the property and the client’s age. Below, we show what percentage of the appraised value we can receive as a loan.
| Client’s age | Loan |
| 60 years | approx. 10% |
| 70 years | approx. 20% |
| 80 years | approx. 40% |
| 85 years | approx. 50% |
So if a valuer appraises our house at 3 million CZK (about 140,000 USD) and we are 80 years old, we are entitled to a loan of 1.2 million CZK (about 55,000 USD).
Banks are hesitant
You will not find this mortgage on the banking market, although banks often consider it. The company Finemo.cz has long specialised in reverse mortgages. The truth is that there is minimal interest in reverse mortgages among clients in the Czech Republic. Many seniors do not trust banks and their products and are therefore not interested in them. One reason is a lack of information about this product. Many people do not know that such a product exists. The reason banks do not offer reverse mortgages is that they target a narrow group of people. Banks are also held back by moral concerns and by the fact that the product directly affects probate proceedings.
Equa bank, for example, sees a risk in how owners will continue to look after the property when they know that it essentially does not belong to them and they only have it for the rest of their lives.
There is also the question of how well older people will be able to look after the property so that it does not fall into disrepair.
A reverse mortgage therefore remains a controversial product aimed at the oldest and therefore the most vulnerable part of our population.
Also read our article on how to build financial independence.
USD amounts are approximate, converted at the Czech National Bank rate of 21.80 CZK per USD on 2 October 2026.
