How to get an Austrian mortgage
Elizabeth Bagwell, Saturday, 25 January 2014
This article is part of a series of 8 articles about buying property in Austria. The other articles in the series cover the following topics:
The Austrian mortgage market doesn't have the flashy 100% mortgages, interest-only mortgages and other deals so popular in the UK and USA. In addition, offers change regularly, so different lenders are better at different moments. However, it's possible to find a great deal.
Many mortgages in Austria are user-friendly deals, with a reduction on interest rates for the first year or interest-only repayments for a year, allowing families to get settled in a new home. These deals are often available to investors buying a second home or an investment property, so it's worth doing a thorough investigation of your options.
How much can you borrow?
Expect to pay a significant deposit when arranging a mortgage in Austria. Loans for over 80% of the value of the property are rare. Deposits of 30- 40% deposits are commonly requested by Austrian institutions lending to international buyers. Each bank has different ways of assessing your ability to repay, but loans of 3-5 times your income are common.
Borrowing to cover costs
The transaction costs of buying a property in Austria are relatively low, and are typically not included in the mortgage. This means that you will need to assess the amount of deposit you have available in light of anticipated transaction costs.
It's possible to extend a mortgage to cover renovation costs, however the Austrian system is somewhat unusual. Rather than pay out a lump sum up front, you must go to the lender and agree a sum. This will then be paid directly to the building contractor on presentation of their invoice. Alternatively, you can pay the contractor and reclaim the funds from the bank, once you have an invoice in hand.
Mortgage costs
Lenders typically charge around 2-4% of the loan value in fees. This means that if you borrow EUR 150,000 you can expect to pay fees of EUR 3-6,000. There is also a 2% fee for the registry of the mortgage deed in the national registry. This may or may not be included in the initial estimate, and the fee structure and total cost varies from lender to lender, so be sure you fully understand the costs of your mortgage application before you sign.
Minimum deposit
There is no statutory minimum deposit required, but lenders typically require 30% or more. The amount required as a deposit will typically be higher if you are an EU (but not an Austrian) resident and higher still if you are a non-EU international buyer. Sources suggest that a 30% deposit is typically required from EU buyers, while a 40% deposit may be required from international buyers.
Repayment periods
Mortgages are typically long 15-30 years, with 20 year terms being most common. Unlike in some other countries, early repayment tends not to be penalised. This is worth investigating if you expect a lump sum at an indefinite future point, for example, if you own a property in your home country you're considering selling or may simply want to rebalance your investment strategy later on.
Interest rates
Mortgage interest rates in Austria in 2013 have been around 2.5-3%. This is unusually low and expected to rise. Banks commonly offer teaser rates, where borrowers are offered a extremely low interest rate for an initial period, typically 6-12 months. After this period is up, the bank's standard rate applies, which may be significantly higher.
Fixed interest rates lasting more than 1-2 years are uncommon in Austria. Floating or variable interest rates dominate, so it is important to understand the difference. A floating interest rate will be a fixed amount over the base rate set by the national bank. For example, if your floating rate is 1.5% higher than the base rate, then should the base rate move from 3% to 1% to 4%, your mortgage rate will track it, moving from 4.5% to 2.5% to 5.5%. Variable interest rates are set by the bank and tend to but do not have to follow the base rate. This means that in the same base rate shift, a variable rate might drop more or less than a floating rate, or, commonly, might not drop at all.
Choosing a lender
The Austrian mortgage market is small and mortgage brokers are uncommon. Most borrowers will have to research the different companies themselves. Mortgages are typically only provided by banks. Particularly in smaller towns, it's worth asking for recommendations from notaries, lawyers and estate agents. They may be able to name an institution you haven't considered or give you an introduction to the local bank manager.
Mortgage application
As with any loan application, you will need to provide information about yourself and the property in order to apply for an Austrian mortgage. Expect to provide at least the following:
Borrowing internationally
As an international investor, you may wish to consider borrowing money outside Austria to fund a property purchase inside the country. Within the EU, it's usually possible to use your Austrian property as collateral for the loan (a traditional mortgage). If you live further afield, you may have to provide other collateral (such as locally held property) in order to secure a reasonable rate. It's particularly worth investigating German mortgages as the language is the same, making much of the paperwork compatible, and the market is larger.
This article is part of a series of 8 articles about buying property in Austria. The other articles in the series cover the following topics:
The Austrian mortgage market doesn't have the flashy 100% mortgages, interest-only mortgages and other deals so popular in the UK and USA. In addition, offers change regularly, so different lenders are better at different moments. However, it's possible to find a great deal.
Many mortgages in Austria are user-friendly deals, with a reduction on interest rates for the first year or interest-only repayments for a year, allowing families to get settled in a new home. These deals are often available to investors buying a second home or an investment property, so it's worth doing a thorough investigation of your options.
How much can you borrow?
Expect to pay a significant deposit when arranging a mortgage in Austria. Loans for over 80% of the value of the property are rare. Deposits of 30- 40% deposits are commonly requested by Austrian institutions lending to international buyers. Each bank has different ways of assessing your ability to repay, but loans of 3-5 times your income are common.
Borrowing to cover costs
The transaction costs of buying a property in Austria are relatively low, and are typically not included in the mortgage. This means that you will need to assess the amount of deposit you have available in light of anticipated transaction costs.
It's possible to extend a mortgage to cover renovation costs, however the Austrian system is somewhat unusual. Rather than pay out a lump sum up front, you must go to the lender and agree a sum. This will then be paid directly to the building contractor on presentation of their invoice. Alternatively, you can pay the contractor and reclaim the funds from the bank, once you have an invoice in hand.
Mortgage costs
Lenders typically charge around 2-4% of the loan value in fees. This means that if you borrow EUR 150,000 you can expect to pay fees of EUR 3-6,000. There is also a 2% fee for the registry of the mortgage deed in the national registry. This may or may not be included in the initial estimate, and the fee structure and total cost varies from lender to lender, so be sure you fully understand the costs of your mortgage application before you sign.
Minimum deposit
There is no statutory minimum deposit required, but lenders typically require 30% or more. The amount required as a deposit will typically be higher if you are an EU (but not an Austrian) resident and higher still if you are a non-EU international buyer. Sources suggest that a 30% deposit is typically required from EU buyers, while a 40% deposit may be required from international buyers.
Repayment periods
Mortgages are typically long 15-30 years, with 20 year terms being most common. Unlike in some other countries, early repayment tends not to be penalised. This is worth investigating if you expect a lump sum at an indefinite future point, for example, if you own a property in your home country you're considering selling or may simply want to rebalance your investment strategy later on.
Interest rates
Mortgage interest rates in Austria in 2013 have been around 2.5-3%. This is unusually low and expected to rise. Banks commonly offer teaser rates, where borrowers are offered a extremely low interest rate for an initial period, typically 6-12 months. After this period is up, the bank's standard rate applies, which may be significantly higher.
Fixed interest rates lasting more than 1-2 years are uncommon in Austria. Floating or variable interest rates dominate, so it is important to understand the difference. A floating interest rate will be a fixed amount over the base rate set by the national bank. For example, if your floating rate is 1.5% higher than the base rate, then should the base rate move from 3% to 1% to 4%, your mortgage rate will track it, moving from 4.5% to 2.5% to 5.5%. Variable interest rates are set by the bank and tend to but do not have to follow the base rate. This means that in the same base rate shift, a variable rate might drop more or less than a floating rate, or, commonly, might not drop at all.
Choosing a lender
The Austrian mortgage market is small and mortgage brokers are uncommon. Most borrowers will have to research the different companies themselves. Mortgages are typically only provided by banks. Particularly in smaller towns, it's worth asking for recommendations from notaries, lawyers and estate agents. They may be able to name an institution you haven't considered or give you an introduction to the local bank manager.
Mortgage application
As with any loan application, you will need to provide information about yourself and the property in order to apply for an Austrian mortgage. Expect to provide at least the following:
- Passport
- Visa (if resident)
- Proof of income / salary
- Proof of deposit funds
- Tax return
- Document indicating you do not have criminal convictions or have defaulted on debts
Borrowing internationally
As an international investor, you may wish to consider borrowing money outside Austria to fund a property purchase inside the country. Within the EU, it's usually possible to use your Austrian property as collateral for the loan (a traditional mortgage). If you live further afield, you may have to provide other collateral (such as locally held property) in order to secure a reasonable rate. It's particularly worth investigating German mortgages as the language is the same, making much of the paperwork compatible, and the market is larger.
On our Dutch website Affidata.com you will find all types of property for sale in Austria by private sellers and estate agents. Find a property in the Austrian Alps, Tyrol, Innsbruck or Vienna.
While the overall transaction costs of buying and selling a property in Austria are relatively low, as they are mostly paid by the buyer it's important
to make sure you understand what you'll be liable for. As well as detailing fixed costs, like the property transfer tax, this article will walk you
through the other costs associated with buying or selling a property in Austria.
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Links
amazingaustria.com - Austrian Mortgage Advisor