Residential Loan – everything new property owners need to know
Where can I get the best financing?
When talking about residential loans, one usually means real estate financing. In general, there are three important forms of housing loans: the building society loan, the mortgage loan and the housing account. A financial mix of different types of loans is also possible. Join us in finding the right private real estate financing.
Should I or should not I?
Ask yourself the following questions before making the final decision
Before you take the step into a new life in the home, you should answer some important questions in advance:
1. Which financing amount is affordable according to the respective household income?
Calculate maximum loan amount
To get a first idea of the amount of credit available for your household income, simply multiply your monthly net household income by a factor of 95. This calculated guideline value should not be exceeded on a home loan.
Monthly net 4.000, – EUR
4,000 x 95 = 380,000, – EUR
NOTE: Please note that this is a guideline only. The individual financial situation should always be clarified with a financial advisor.
Calculate fictitious loan installment
With this calculation, you can find out what monthly amount you can afford the most with your family.
Rule of thumb : The monthly burden must not exceed half of the monthly family net income.
Monthly net 4.000, – EUR
4,000 / 2 = 2,000, – EUR
The monthly load should not exceed 2.000, – Euro.
TIP : If you want to be on the safe side, make sure that the rate is not more than a third of the household income. In the case of 4,000 euros net household income, this would be around 1,300 euros. In this way, you also remain more flexible in terms of vacations or other financial expenses. Also read the paragraphs: “To what extent are you willing to limit yourself to afford your dream property?” And “avoid interest rate risk”.
Use residential loan calculator
You now know approximately in which price range your property should move in order to be able to finance it in the long term. With an online loan calculator, you can now get a slightly more detailed overview of the monthly charge and the total amount of the loan plus interest.
TIP : Calculate the amount with a minimum interest rate of 4% for a short term. At the latest when you start your pension, the loan should be paid out.
2. To what extent are you willing to limit yourself in order to afford your dream home?
According to an online survey by immobilienscout24, half of the respondents consciously restrict themselves in order to be able to afford their dream home. That will not change in 2019 either. Because property prices in Austria continue to rise. If slower than the years before. Therefore, ask yourself to what extent you are willing to restrict yourself or what you are willing to give up.
Burgenland and Styria are catching up
The federal states, which have long been regarded as the land of plenty for budding homeowners, will be attracting real estate prices in 2019. However, Burgenland continues to offer unique funding opportunities. Whoever wanted to build or buy here, should not lose too much time. Unless you wait for the swirling real estate bubble in many places, which according to some market observers is about to invade our country soon. A written request for this was first made on 20.11.18 by Mag. Bruno Rossmann to the Federal Minister for Constitution, Reforms, Deregulation and Justice, and on 18.01.2019 by Dr. med. Josef Moser answered. According to the published figures of the reply, however, it does not look as though it is burning at the moment. These figures do not say anything about the year 2019, and here in the media is already spoken of a stagnant demand.
The Austria-wide price development for land, houses and apartments brings you the Statistics Austria closer by means of graphics. Also there (under tab “Press Releases” read: Until two years ago, the prices rose particularly strong in Vienna and Western Austria.Whether this means that with us soon – as in Germany – people flee to masses from the metropolises ?
Another question to fulfill the dream of owning your own home is this:
3. To what extent are you prepared to avoid the metropolitan areas?
It is no secret that a large proportion of homebuyers evade favorable surroundings. In this respect also rural exodus is an issue. As purchase prices continue to rise in conurbations such as Vienna, buying a property in this area is becoming increasingly unattractive. Properties are well away from the beaten track, for example in parts of Burgendland, Styria and the Waldviertel, but even these rather favorable federal states are catching up on real estate prices.
Blame for the high price policy are speculations. This does not only apply to rental rates. Apart from Vienna, areas in Salzburg, Innsbruck, Graz and Linz are particularly affected.
4. Is buying really better for you than rent?
Not always attracts the argument of tenant savings. If this is consumed by other expenses again, you save yourself with the purchase of a house absolutely nothing. Rather the opposite is the case. For this question, be sure to compare the total cost to the rental price. Do not forget to include the heating costs or regular repairs. So much transparency and honesty must be: In most cases, you will not spare anything, but pay well on it. Somehow also logical: You simply do not buy a house to save yourself money. Experts agree. They believe that renting is currently cheaper than buying. The acquisition of a property therefore only pays for itself after 30 years. But beware: a paid-out property also ensures a pleasant pension, because the cost of living is reduced to a minimum.
INFO : An example: If you save 300, – EUR for 30 years with a current top saving rate of 1.9% you will receive around 145.000, – EUR. Those who currently finance with a realistic 2% interest rate and pay 300, – EUR monthly loan installment, will receive a loan amount of around 83,000, – EUR. That is a difference of 62,000, – EUR in favor of saving. But taking into account the rent increase with 1.3% (very low) is from a rented apartment today with 500, – EUR per month is estimated in 30 years amazing 953,77 EUR! The rents will almost double in 30 years, which in turn represents a big plus for the home.
Rethink your life planning
What will your life look like in five or ten years? Of course you can not say that exactly. But in principle you can find out if you are a “suitable” property owner. If you plan on traveling a lot and looking at the world, you should consider carefully whether both dreams – the house and the travels – can be financed. With the above-mentioned “third rule” of household income, you can reconcile both. One should not always explore the limits of the possible, but rather leave more room for other financial wishes.
TIP: Even before you strike
Appreciation: Does the value of the property correspond to the current market value?
Let your property be estimated on its actual value. A valuation report drawn up by real estate agents, independent experts and banks.
Compare residential loan
These points should be kept in mind when comparing:
So you are convinced that you are the right property owner? However, before you start looking for the best offer, remember the following four points:
- processing fees
- Account management fees
- estimated costs
These four points are usually negotiable with the bank.
Your credit rating also plays a role here: the better your reputation, the better the framework conditions for the loan. The savings potential of our assumed loan of 300.000, – Euro is around 30.000, – Euro.
Processing fees for home loans
The normal costs for the processing fee vary between 0.5% and 3%. The banks are completely right. A lawsuit against processing fees has already lost the Association for Consumer Information (VKI). So it’s up to you to start looking for the financier that offers you good conditions. Here unbound financial advisers provide great services. They share the processing fee with the bank, helping to save money and time. Due to their independence from the banks and their experience, they know exactly at which bank the customer gets the best terms and conditions. Again think of differences of total up to 30,000, – EUR. The value of a beautiful mid-range car!
Account management fees
As with the processing fee, collecting the account maintenance fee is completely legal. The amount ranges between 4 and 16 euros per quarter.
These are needed for the independent appraiser who appreciates the property. They are very different, but amount to around 700, – EUR for a large house.
Insurance for the residential loan
The comparison of credit residual insurance and term life insurance pays off. Again, you can save a lot again.
Check the repayment carrier
Check if the loan offered is a bullet loan. Debtors, bond funds, life insurance and equity fund savings plans are eligible for redemption. It should be noted, however, that in all flexible forms of savings additional interest rate risk comes into the financing. It must never be calculated with higher interest rates than the guaranteed minimum interest rates.
Avoid interest rate risk / do not take currency risks
To reduce these risks include:
- Choose a Euro loan to avoid the interest rate risk of being exposed to a foreign currency loan.
- Opt for a fixed rate of return. This will save you the risk that fast rising interest rates could bring with it. For example, the Sparkasse offers a fixed-interest guarantee over 20 years.
- Also ask for the bank’s own interest rate risk management.
- With variable interest rates : low interest rates do not stay forever. So stay with a long-term affordable amount that can easily pay even with a rate hike. At present, there is already a tendency towards interest rate hikes.
Do not forget to consider the additional costs in addition to the costs of the house!
Go in search of the right provider
Never rely on a single bank offer: compare as many offers as possible!
A residential loan for private real estate financing is available in Austria from:
- building societies
- funding agencies
- Unbound financing advisor
The maximum amounts vary from provider to provider.