Why does this particular topic interest me? I have had building savings (stavební spoření) since 2016, and this year, 2022, it will come to an end after 6 years. I set it up because I had started working full time and I knew I would have free cash left over every month. What to do with it? Back then, I was not that interested in finance. Setting up building savings was the peak of my financial literacy at the time.
I was duly proud of myself. A savings product as proof of adulthood. Now I am facing a decision about what to do next with the money I have saved. I can withdraw the savings, but I do not currently need a large sum of money, I can keep saving under the same terms, or I can take out a loan that my partner and I would use as the basis for a mortgage on the house we dream of. How a building savings loan works is what we will find out in the main part of this article.
Read also: 1 tip that will finally teach you how to save
Useful information about building savings
Maybe now is the right time to set up building savings, or to set up building savings for your children. It makes sense that in a time of high inflation, you need to grow your free cash at as high an interest rate as possible. Try looking around among the building savings providers (stavební spořitelny), some of them now offer attractive returns. With the state contribution of 2,000 CZK (about 92 USD), you can get above 4% p.a.
Financial tip: some banks now offer higher returns than in the past on their savings accounts too.
You can set up building savings for two purposes:
a) saving free cash and growing it through state contributions and interest,
b) the intention to take out a building savings loan.
Building savings
The condition for receiving the maximum state contribution of 2,000 CZK (about 92 USD) a year is an annual deposit of 20,000 CZK (about 920 USD) and a savings period of 6 years. You can withdraw the saved funds earlier than after 6 years, but you will lose the state contributions credited to you. You can keep using building savings under the same terms as when you set it up even after 6 years, but keep an eye on reaching your target amount.
From my own experience, I know it does not pay to put off your annual deposit into your building savings account until the period between Christmas and New Year. The money may not arrive at the savings provider in time, and you will lose a corresponding part of the state support. I recommend setting up a monthly standing order of at least 1,700 CZK (about 78 USD) in the middle of the month right from the start of your savings period (this way you will save 20,400 CZK (about 940 USD) a year and have the state contribution guaranteed).
Note: building savings contracts have a notice period. You will probably have to wait 3 months to have the money paid out. With my building savings provider, you can request immediate payout on condition that you deposit 10,000 CZK (about 460 USD) into another building savings account with the same provider.
The state pays out the state contributions at the end of April the following year.
Building savings loan
Right at the start, I should mention that you can only take out a building savings loan to finance housing needs. Housing needs are defined by Act No. 96/1993 Coll. in Section 6 (https://www.zakonyprolidi.cz/cs/1993-96).
As soon as we have explained the term target amount, we will move on to explaining the 3 types of building savings loan. These are:
- a regular building savings loan,
- a bridging building savings loan,
- a building savings loan secured against a property.
You probably know that you have two options for financing housing. These are a building savings loan and a mortgage. Financial calculators online are dedicated to comparing how favourable these two products are.
In general, it is recommended to use the funds obtained from a building savings loan (whether a regular building savings loan or a bridging building savings loan) for renovating or buying a cheaper property. With a bridging building savings loan, you lose out slightly financially, but a big advantage is that you do not need collateral and you do not need to have 10% of your own funds saved up.
Why is the target amount important?
The target amount is the sum of the saved funds (your own deposits, the state contribution and the interest on them). Its size depends on the purpose for which you are setting up your building savings. I did not pay much attention to the target amount, but I chose it correctly for my original savings purpose. I chose 200,000 CZK (about 9,200 USD).
The target amount is important for 3 reasons:
- you can save within building savings up to the amount of the target amount,
- the option to take out a loan is based on the condition of having saved a certain part of the target amount (typically 30% to 60% of the target amount),
- you can take out a building savings loan up to the amount of the target amount.
The target amount I chose, 200,000 CZK (about 9,200 USD), is not enough for the purposes of a loan. I can increase the target amount, but if it is for savings purposes, I have to reckon with paying an administrative fee, and I might have to move to the building savings provider’s new terms. If I want to increase the target amount with the intention of taking out a loan, there is probably no issue with the increase.
Regular building savings loan
To open up the option of taking out a fairly favourable regular building savings loan, I had to meet the following conditions:
- as I already mentioned, I had saved a certain percentage of the target amount (35% in my case),
- I had been saving for at least 2 years,
- the rating number, which the savings provider calculates based on the savings period and the amount saved, had to reach a certain level.
I can take out a regular building savings loan without securing it against a property up to about 1,000,000 CZK (about 46,000 USD) (the maximum loan amount without securing it against a property differs depending on the provider). Of course, I would first have to save 350,000 CZK (about 16,000 USD). The interest rate on such a loan differs depending on the terms of the particular provider, but at the moment this loan works out better than a mortgage.
I can turn a regular building savings loan into the own funds needed to get a mortgage (this was my original intention). I still have to be sufficiently creditworthy for the bank. It depends on the size of the repayments on the building savings loan and the mortgage, and on the level of income. Financial specialists do not really recommend this way of financing housing, because the loan burden tends to be too risky.
Bridging building savings loan
You can take out a bridging loan right after setting up your building savings. At first, you pay interest on the total amount borrowed and keep saving up money until you meet certain requirements that allow you to take out a regular building savings loan. At the same time, you are still entitled to the state contribution and interest on the saved part of the money. After this bridging period comes the period when you start repaying the regular building savings loan (both principal and interest at the same time, as with a mortgage).
You are entitled to the state contribution and interest on the saved amount for the duration of the savings period. From the moment of the so-called allocation of the target amount (the end of the savings period or of the bridging loan), it becomes a loan, and you lose your entitlement to the state contribution and interest.
Building savings loan secured against a property
If you want to take out this type of loan, you probably need a larger sum of money. When comparing the benefits of a mortgage against a building savings loan secured by a property, the mortgage comes out better.
For me, it is currently advantageous to keep using building savings as a savings product. I can withdraw the money at any time and use it as needed, whichever is most favourable. If my partner and I find a house that we decide to buy, we might end up using a regular building savings loan too.
USD amounts are approximate, converted at the Czech National Bank rate of 21.80 CZK per USD on 2 October 2026.
