Since Austria is a very attractive country to live, do business and buy real estate, real estate loans are also very common there.
A real estate loan in Austria is granted by banks or other financial institutions to finance the purchase or construction of real estate in Austria. Real estate loans are usually granted for several years or decades and are repaid with applicable interest amount. The exact terms and procedure for obtaining a real estate loan depend on various factors:
- creditworthiness of the borrower;
- loan amount;
- type of real estate;
- loan term;
- credit institution.
In addition to the borrower being of age and having a regular income, there are several other requirements for taking out a loan in Austria. These requirements change from time to time and usually become less favorable for borrowers.
For example, the Financial Market Authority’s (FMA) Regulation for limiting of systemic risk in debt-based financing of residential real estate at credit institutions (hereinafter – the “Regulation”) obliges banks and other financial institutions to pay increased attention to creditworthiness checks as of 1 August 2022. The reason for this is that the Austrian National Bank (OeNB) and the Financial Market Authority (FMA) are of the opinion that loans have so far been granted too lightly, which may have affected the stability of the Austrian real estate market. A more detailed credit assessment will allow a financial institution to predict a customer’s likelihood of repayment.
The most important innovations of the Resolution are as follows:
- borrowers must contribute at least 20%, i.e. one-fifth of the purchase price, including additional real estate costs, as equity (in practice, it often turns out that this % should be at least 30-40);
Example: An apartment costs 350,000 euros, plus 35,000 euros in additional costs. The new client must raise at least 77,000 euros (20%) on his own. The remaining 308,000 euros (80%) will be covered by the loan.
- the repayment rate cannot exceed 40 % of the monthly net income;
Example: The income of a family of four is 3,500 euros per month. The bank grants a loan of 250,000 euros for the purchase of a home for a period of 25 years at 4 % per annum. At repayment, the payment will be 1,327 euros per month, or 38% of income. Although this is close to the 40% minimum, it is allowed.
- the maximum term of a real estate loan cannot exceed 35 years.
Exceptions to the general rules:
Since the risk of non-repayment is limited for relatively small loan amounts, the Resolution provides for exceptions in which a bank or financial institution may disregard the above novelties (e.g., renovations and redevelopments with a value of up to 50,000 euros).
Interest rates
Real estate lending rates in Austria are relatively low compared to other countries but have been increasing over the past few years. Currently, real estate loans have an average interest rate of 2.5% to 4% per annum.
Depending on the value of the property, the client’s equity and creditworthiness, the bank may offer a lower or higher interest rate.
The main documents for the bank interview (the consultant will inform about additional documents individually):
- income statement (salary/ dividends/ property sale agreement/ individual entrepreneur’s declaration/ individual’s declaration);
- real estate purchase permit (if the applicant is a foreigner);
- real estate documents (ideally, description and plans);
- cost allocation (Kostenaufstellung);
- budget calculation (Haushaltsrechnung).
It should be noted that banks review the documents on the origin of funds very carefully and usually require additional documents confirming the applicant’s creditworthiness.
Thus, starting from 2022, financing real estate in Austria is not as easy as it was in previous years. To obtain a favorable real estate loan, it is advisable to have a high equity ratio.
To have a better chance of successfully obtaining a real estate loan in Austria, you can benefit from the experience of our experts at VigoImmobilien. We will help you understand all the intricacies of this complex topic and help you obtain a loan on the most favorable terms.
