Your mortgage is approved, but it can still happen that the property doesn't get paid for. Not because of the bank, but due to mistakes that pop up between approval and the drawdown. And that's exactly what we're going to talk about today. The moment the bank says the mortgage is approved, most people breathe a sigh of relief. The biggest risk—the risk of not being approved or being rejected—is behind you.
But it's crucial to get one absolutely key thing straight right away: approval doesn't mean it's all done. The truth is, from approval to the drawdown—that is, paying the purchase price—you'll face a number of other risks, and this whole stage actually requires more cooperation from everyone involved than the approval process itself.
The good news is that everything you need to do is very clearly defined, and it's basically just another pile of paperwork. If you want to know what's coming after your mortgage is approved and everything you need to do to successfully draw down the funds, then this article is for you.
After Approval, You Take the Reins
A bank never just sends money out on its own, simply based on an approved mortgage. It's right after the approval that the biggest chunk of paperwork begins for the client, and you really shouldn't underestimate it. Clients often ask me when the drawdown will happen. The only correct answer to that question is that it depends mainly on the client and, possibly, the sellers. The bank doesn't really have a major impact on the timeline during this process. This is a huge contrast to the approval process, where the bank is often the bottleneck.
It's worth mentioning that some drawdown conditions differ from bank to bank, but the basics are usually similar. Today, I'll only break down the drawdown for a purchase, because that's where time is most sensitive—you're up against deadlines from the reservation agreement and later the purchase agreement.
Step by Step: From Signing to Money in the Account
So, let's take it one step at a time. After approval, it's time for signatures, and there are quite a few of them.
1. Signing the Loan and Lien Agreements
First, you sign the loan agreement. Many banks now allow for remote signing, but often an in-person meeting is still required, sometimes even with pen and paper. (I know, so 20th century.)
Along with signing the loan agreement, you'll receive the lien agreement, which you then take with you to sign the purchase agreement. Why is the purchase agreement signed after the loan agreement? It's not strictly necessary, but it's practical. It's only after signing the loan agreement that you get the lien agreement, which you primarily need the seller's signature on. This way, you don't have to meet up twice.
What if the purchase falls through?
Let me answer a common question right here: What if the purchase agreement never gets signed, but the mortgage agreement already is? It's not a problem. It's rare, but it does happen that for some reason the purchase agreement isn't signed. It could be that you can't reach a final agreement, or—and this is, unfortunately, a relatively common reason from my experience, quote-unquote—the seller passes away. I know it sounds awful, but a transaction not being completed after the reservation agreement is signed is truly very rare. So, curiously enough, the most common reason is indeed the seller's death.
When this happens, the issue of a potential fee for non-drawdown comes up. Let me put your mind at ease right away: it's customary for civilized banks not to charge this fee if it was objectively impossible to complete the deal. However, be warned, there are banks on the market that have no qualms about demanding a non-drawdown fee in such situations, and it might not be a small one. Which reminds me, there are some banks I wouldn't get a mortgage with, no matter how cheap it was.
2. Filing the Lien Agreement with the Land Registry
So, you have the signed loan agreement, you have the lien agreements with you, and you're heading off to sign the purchase agreement. On this occasion, you also sign the attorney escrow agreement and the aforementioned lien agreement.
Now, the lien agreement needs to be delivered to the Land Registry. There are two options:
- In person at the filing office: Along with a so-called "proposal for registration of a lien."
- Electronically via a data box: The original paper lien agreement with all signatures is converted into a digital format (this is called an authorized conversion) either at a Czech POINT office or by a lawyer and sent to the bank's data box. The bank then sends it to the Land Registry on your behalf.
If the bank allows this method, I highly recommend it. You'll avoid running around to the Land Registry and won't have to deliver the original lien agreement to the bank. The whole thing is much simpler and leaves less room for error. With the paper version, you have to deliver one original of the lien agreement, along with the registration proposal stamped by the Land Registry, back to the bank.
In the vast majority of cases today, you can draw down the funds based on a filed proposal for registration of a lien. This means you don't have to wait for the 20-day protection period at the Land Registry to pass.
3. Submitting Other Documents to the Bank
The purchase agreement and the attorney escrow agreement just need to be sent to the bank as electronic scans. Most banks nowadays have an option to upload documents directly through their online banking or other apps. I recommend using this, as it also gives you a record of what's already been submitted and what's still missing. It's the most reliable way.
What are the other conditions for the drawdown?
- Proof of payment of your own funds: Most banks want to see that you've paid part of the purchase price with your own money. A simple PDF downloaded from your online banking showing the completed outgoing transaction will do the trick. The first part is often the reservation deposit, so you'll need to provide proof of that payment as well.
- Property insurance: Yes, even before the property is yours, you have to insure it according to the bank's requirements. The bank will specify a minimum insured amount, and the property must be insured for at least that much. The insurance is valid even if you don't own the property yet.
- Certificate of no tax arrears (for self-employed individuals): Some banks have specific conditions. One worth mentioning is a certificate of no tax arrears from the tax office. I'll admit, the reason for this requirement is a bit lost on me, but if you're self-employed, you sometimes need it. It's a good idea to ask about this in advance, as it takes a while for the tax office to issue the certificate.
4. The Drawdown Request
And now for the final step. Even when you've submitted all the necessary documents to the bank, it won't send any money anywhere on its own. It needs your explicit instruction to do so, which is the drawdown request.
These days, requests are submitted electronically, most often through online banking. In the request, you simply copy the payment instructions from the attorney escrow agreement. Only then is it done, and all that's left is to wait for the money to arrive in the account.
The processing time for the request varies slightly between banks, but it's usually around five business days. It's a good idea to have at least 10 business days for the drawdown in your purchase agreement. Be careful here to make sure they are actually business days. With Christmas approaching, I probably don't need to explain why.
It All Makes Sense
If everything is correct, the bank will release the funds, and then the property transfer can begin. Your work is done at this point, and you just need to wait for the Land Registry to register your ownership rights, and then you can get the keys.
When I throw all of this at you like this, it might seem complicated. But if we sum it up:
- The bank wants to have security (that's the lien agreement).
- It wants the property to be insured.
- It needs to verify that it's sending the money in accordance with the purchase and escrow agreements.
- And it also needs to verify that you've paid your part of the money.
Each of these points makes sense and has a good reason. So, in the end, it's not that complicated once you understand what each part is for.
