Tips on buying and
financing real estate
What costs are incurred when purchasing real estate in addition to the purchase price?
When buying a property, do not underestimate the additional costs. These include approximately 3.5 % land transfer tax, 1.1 % land registration fee, 1.2% lien costs and around 1-3 % lawyer’s or notary’s fees.
The figures relate proportionately to the purchase price. In addition, there may be a broker’s commission (around 3% plus 20% VAT) as well as processing fees, appraisal costs, partial disbursement surcharges or commitment interest. Are there any costs when taking out a loan through Fimobilia? Fimobilia does not charge any processing fees or other costs for the consultation and mediation of a real estate loan. In case of a successful mediation, you will only be charged a processing fee for the financing via the lender (the financing bank).
What ancillary credit costs can be expected?
Ancillary credit costs are those costs that are incurred when a loan is approved and the contract is concluded. As a rule, these are one-off and non-recurring or no ongoing costs. In the offers of our partner banks you will find all relevant costs broken down accordingly.
So you should know the following cost items:
- Processing fees
- Lien registration fees
- Costs for a ranking of the intended pledge / appraisal fees
- Fees for any bank guarantee
- Certification costs for the pledge deed or other land register transactions
- Costs for a notarial deed
- Land register registration fees (ongoing costs)
- Costs for ⦁ KSV ⦁ queries
- Costs for online legitimation
- Own resource procurement fees
- Contributions to administrative costs
- Costs for account management (current costs)
- Costs for term life insurance (running costs)
How much equity do you need for a home loan?
In principle, it is possible to purchase a property without equity capital. This is called full financing and means that the loan covers the entire costs. However, such home loans are considered riskier by banks, which is why interest surcharges are usually due. In addition, the banks base their lending on the purchase price or the market value – the so-called ancillary purchase costs are often not taken into account and must therefore be paid additionally.
The ancillary costs consist of the lawyer’s or notary’s fees and land registry fees, a possible commission for the estate agent and the land transfer tax. So if you want to buy a house for 200,000 euros, you have to reckon with additional costs of around 19,000 euros, which you usually cannot finance through the real estate loan.
So it makes sense to cover not only the incidental costs with your own capital when taking out a home loan. In this way, you can reduce the interest you pay to the bank because there is less risk. A borrower whose creditworthiness is rated only “sufficient”, for example because of a lack of own funds, must expect interest surcharges of 0.25 to 1 percentage points.
For a purchase price of 200,000 euros and a term of 20 or 30 years, this surcharge results in additional interest costs of several thousand euros. In addition, especially in times of low interest rates, you should calculate a full financing thoroughly and rather conservatively. After the end of the fixed-interest period, the interest rate level can change sharply upwards, which can lead to problems with the repayment of the follow-up financing if the calculation is too tight.
Tip: We advise our clients to have an equity ratio of at least 20 percent. This lowers the interest surcharge charged by the banks. Another advantage is the shorter repayment period and the resulting reduced interest burden.
What counts as equity?
In principle, this includes all assets that can be used to reduce credit or as collateral: Own funds include, for example, savings on building society savings accounts, savings accounts, securities, gold coins or real estate.
What belongs to a private household bill?
Calculating income and expenses is all well and good, but what all should be taken into account? On the one hand, there are living costs and, on the other hand, fixed costs that arise anew every month. Here is an overview of how you can avoid overlooking anything:
Living expenses are all expenses that one inevitably has in daily life. These are essentially the following:
- Housing costs (rent, accommodation in case of frequent professional travel, etc.)
- Health care (medicines, care costs, etc.)
- Training costs
- Telecommunications (telephone, television, internet, broadcasting fees, etc.)
- Costs for public transport or vehicle maintenance
- Apart from that, of course, leisure activities also cause certain expenses, as do animal
- husbandry, donations, membership fees and other items that are not absolutely necessary.
Apart from that, of course, leisure activities also cause certain expenses, as do animal husbandry, donations, membership fees and other items that are not absolutely necessary.
How can you basically calculate monthly expenses and fixed costs?
Fixed expenses include all amounts that are debited again every month. Such permanent expenses are usually documented by bank statements. In the fixed costs you will find the expenses already mentioned above:
- Rent + operating costs
- Energy supply
- Telephone and internet connection
- Broadcasting fees and television providers
- Transport costs
- Insurance (life, household, supplementary, car insurance, etc.)
- Subscriptions (music and streaming services, magazines etc.)
- If applicable, maintenance payments for children (alimony)
Don’t forget the monthly instalments for existing loans or leases, unless they are paid off with the new financing.
As a rule, however, this is not the end of the story and there are other items that vary from case to case. They do not necessarily have to be fixed costs, but these cost factors should definitely not be forgotten. Here is just a small selection:
- School or kindergarten fees
- Holidays and travel expenses
- Clothing and leisure costs
- Culture & Hobby
- Donations if applicable
It is important to get an overview of your expenses.
As you can see, a list of fixed costs alone does not give a complete picture. Therefore, include all other expenses that are incurred more or less regularly in the fixed costs.
Tip: We generally recommend calculating a safety buffer. For example, “only” calculate the acquisition costs for a new washing machine, a children’s room, etc. over 12 months, and firmly plan for this additional burden.
This way, despite credit instalments, you are prepared if the washing machine breaks down, the laptop accidentally falls off the table or you need tradesmen.
KSV statement and credit check:
Creditworthiness in Austria.
The credit rating can have a great influence on personal future planning. It is therefore not surprising that many people would like to know what their creditworthiness is like.
Free credit check:
The KSV self-disclosure, “Der Kreditschutzverband”, founded in 1870 (KSV1870) is an important address in Austria when it comes to creditworthiness-related information. The company collects personal economic data on an ongoing basis. KSV 1870 also receives these from affiliated credit institutions and then passes them on to credit institutions in turn upon request. This can mean, for example, that the bank learns whether there are still open or even rejected credit relationships. According to the General Data Protection Regulation, you have the right to inspect your data free of charge once a year. You can exercise this right with all relevant credit agencies or creditworthiness databases. This does not only include KSV 1870, but also companies such as CRIF or Bisnode, for example.
Tip: It is highly recommendable to take advantage of this offer, because this way you will become aware of incorrect data and can ensure that it is deleted. So if, for example, a loan that you have already finished paying off is still listed, you can request that this entry be deleted. However, it can take up to 8 weeks until the request is actually implemented.
Which repayment rate should I choose?
The ideal repayment rate depends on your goal of being debt-free. In the best case, the real estate loan should be paid off by the time you retire. Note that at the current interest rate level, it will take you about 48 years to repay a loan with an initial repayment of 1 per cent. With an initial repayment of 2 percent, on the other hand, the term is reduced by more than 15 years. It is best to adjust your repayment to the interest rate level and your age. As a rule, you also have the option of repaying within the fixed-interest period. However, the lending banks usually charge a penalty in this case.
Debt rescheduling for real estate financing - is it worth it?
If the fixed interest rate of a home loan has expired and there is still a residual debt to be paid, the old loan agreement is usually continued with the previous bank – at new conditions. This procedure is called prolongation. Many borrowers miss the opportunity to obtain offers from other providers for a continuation of the mortgage. The prolongation offer is not always the most favourable – those who look for offers for a debt rescheduling, on the other hand, can make comparisons. The position of the borrower is usually even better after a housing loan that has been repaid smoothly so far: he or she appears to the new bank as a reliable and solvent partner. More security for the bank means for the borrower that he can negotiate better conditions for follow-up financing. A debt rescheduling is often more favourable than continuing the construction financing with the previous lender. The certification costs and land registry fees due for the redemption of the collateral are usually more than made up for by lower interest rates for the new property loan. These are usually only a few hundred euros. Often an interest rate that is a few tenths of a percent lower than the previous one is enough to offset these costs. Debt restructuring is particularly interesting for borrowers who took out their mortgage during a period of high interest rates.
Before the fixed interest rate expires, however, rescheduling is usually unattractive. This is because a possible early repayment penalty (Pönale) is then due from the previous lender, which cancels out the interest rate advantages due to the better offer. However, follow-up financing can also be planned in advance, even if the current contract is still valid for one year. The new contract then comes into effect at current conditions as soon as the fixed interest rate with the previous lender has expired.
Despite the numerous advantages, many borrowers are reluctant to reschedule their debt because comparing new offers from different financial institutions is complicated. Fimobilia relieves borrowers of the search for a favourable follow-up financing and analyses the market according to our clients’ specifications.
What documents does the bank need?
As a rule, the lending institution requires the employer’s salary confirmation or the last three pay slips for salaried employees. Self-employed persons need a current income tax return or the final income/exception statement. If necessary, you should also provide proof of additional income (e.g. rent).
Tip: Normally, banks also require a so-called budget plan (a comparison of regular income and expenses) as well as a valid, official photo ID In the case of a debt restructuring, banks also require the residual debt confirmation of your existing contract.
When can I cancel my home loan?
Attention: In Austria, you only have the right to withdraw from a home loan within 2 working days after submitting the contractual declaration. The withdrawal period only starts when the consumer (borrower) has received the ESIS leaflet and the information on the right of withdrawal, but ends at the latest one month after conclusion of the contract. You should therefore clarify any ambiguities in advance before concluding a home loan. We at Fimobilia are happy to help you with this.
Under certain conditions, you can also repay your home loan early and thus terminate it, for example if you want to reschedule your debt or if you have unexpectedly come into equity capital in the case of an inheritance: In the case of home loans with variable interest rates, repayment is possible at any time. During the fixed-interest period, banks usually demand a penalty for early repayment.
Tip: However, a debt restructuring can still be worthwhile in the current low-interest phase. We will be happy to help you at any time.
When is a home loan refused?
Banks will only grant home loans if you have a good credit rating, i.e. if you can prove that you are creditworthy. This is done by providing proof of a regular income and/or other collateral such as real estate or savings. However, credit institutions also collect information about borrowers themselves and usually access data from external providers, such as the Kreditschutzverband von 1870 (Credit Protection Association of 1870), for the so-called credit check. If you do not meet certain requirements, the bank will refuse your housing loan.
When is the first instalment due?
As a rule, you start repaying (amortising) a housing loan in monthly instalments from the conclusion of the contract, or in the following month at the latest. However, there is also the possibility of interim financing of construction projects via a housing account, which changes into a housing loan at the end of the term. As a rule, no instalments are due until then. We will be happy to inform you about all the options for real estate financing.
How high are the interest rates?
Most credit institutions use the 3-month EURIBOR as the base value for the amount of interest and charge an interest surcharge (“margin”) on this reference value. The amount of the mark-up depends on the creditworthiness of the borrower.
Tip: The difference in interest rates between borrowers with good and sufficient creditworthiness can amount to between 0.25 and one percentage point, according to a study by the Chamber of Labour (information PDF) https://media.arbeiterkammer.at/PDF/Wohnkredite_Vergleich.pdf.