Having your own roof over your head: that is the wish of many people in Austria. Home ownership is often high on the list of unfulfilled dreams. Given the low interest rates on the market, buying a house or apartment has never been easier. Experts believe that the cost of housing loans will remain attractive for a few more years. That is why it is now more worthwhile than ever to take out a home loan. But what do you need to know?
How does a home loan work?
A home loan is intended for people who want to buy property. The purchase price is in the lower six-figure range, and this amount is not payable for most people without a loan. With a residential loan you finance the purchase price and become the owner of the property. From a legal point of view, the owner is the financing bank, which receives a mortgage from which it can meet its claim if the borrower is in arrears with the payment of its installments. As long as this does not happen, a home loan over many years is a safe and predictable way to finance the purchase price for the dream house. In principle, a residential loan is nothing more than a long-term loan. Nevertheless, it is somewhat more complex than a classic installment loan. Because of the long running time, it is not suitable for everyone.
Who is a home loan suitable for?
Of course, a residential loan is primarily intended for people who want to purchase and finance residential property. A distinction must be made between personal use and rental. On the one hand, this loan is very suitable for people who want to stay in one place for long periods for private and professional reasons and who therefore want to buy a property there for their own use. Anyone who believes that they are likely to live permanently in a specific location can consider buying a property. On the other hand, if you are not ready or it is not suitable for professional reasons to permanently fix yourself, buying a property for your own use is usually not the right way. Then it can be better to live for rent and not take on the burden of a home loan. As an alternative there is still the rental of the property. A home loan is also an option. If this option is a viable option, you have to know that managing a rented property involves a certain amount of time and money. Those who cannot or do not want to make this effort should not invest in this type of capital.
What are the advantages of a home loan?
The greatest advantage of this loan for the borrower is surely that he can pay the purchase price for his dream property immediately. So he doesn’t have to save money for many years and pay rent at the same time. The home loan makes the process of buying a house very easy for the borrower: he takes out the loan, the bank transfers to the seller, the buyer moves into the property and repays the loan. If the residential loan is concluded with a fixed interest rate, the borrower also has the advantage that his loan rate remains unchanged during the borrowing period. So he has a high degree of planning security and knows how much money he has to spend each month on the installment. The bank may not change the interest rate during the borrowing period. As a result, costs remain stable over many years, even if market interest rates rise.
What are the disadvantages of this loan?
The biggest advantage is also the main disadvantage of the home loan. The borrower is committed to a monthly repayment for many years. Even if something changes to the detriment of his financial situation, if he becomes sick, disabled or unemployed and earns less, this rate must be paid. There is insurance against disability, and unemployment provides state support for a period of time. Nevertheless, this support is significantly less than your usual income. Regardless of this, the credit installment continues to be paid. Even if the borrower has to change his location and wants to live in a different place for rent, the loan installment is still to be paid. In this case, the rental of the property is usually the only option because it is financially impossible for most consumers to pay rent and loan installments in parallel.
Which banks grant housing loans?
Anyone looking for a loan at low interest rates must compare them. In principle, you should contact your own house bank or an on-site bank with branch service or a direct bank. A home loan is a fairly complex loan. At this point it differs somewhat from a classic installment loan. This is why many consumer protection experts recommend that you do not take out a home loan without prior personal advice. Of course, this loan can also be taken out after a telephone consultation or after an email contact with a direct bank. However, if you have no experience with residential loans and do not know exactly what the optimal loan should look like, you would be better advised to seek a personal conversation with a local bank advisor. Regardless of whether you want advice in person, by phone or by email, there are some helpful tips on how best to prepare for a credit meeting. You should know and take these to heart to find a loan according to your own ideas that fits the individual options exactly.
What should you look out for in a credit discussion?
It is best to get a sample offer in the first conversation that meets the requirements of the Consumer Credit Act. This is standard information that must be issued for every loan across Europe before it is signed. This form contains the most important basic data and the conditions for the loan. Although they are non-binding and are subject to creditworthiness checks, you can use this form to be certain early on which conditions the bank requires.
If you have this form given before the first interview, you can formulate your questions in a targeted manner and ask them in conversation. One should pay particular attention to the insurance policies that the bank requires in connection with the housing loan. This can be, for example, fire insurance or residual debt insurance. If such insurance is required, you should obtain several offers from an insurance expert.
The banks’ offers are often created by an in-house insurer or a cooperation partner, which are not necessarily particularly cheap. If a borrower decides to close with another borrower or even with a guarantor, it is important to clarify the conditions under which a borrower can withdraw from the loan. It is important for the borrower that he knows his right to get a binding draft of the contract for review before signing the contract. The final terms and conditions of the bank must therefore be specified in this draft contract. He should check these carefully and – if necessary – also question them in a second conversation. Only then do you decide whether to take out a residential loan with this bank.
What are the costs of the housing loan?
As a consumer, one probably thinks first of all of the usual interest on the loan, which depends on the market level. But there are still some additional costs that you should know because they also affect the interest rate. The additional fees include, for example, the costs of entering the lien in the land register. They are 1.2 percent, and the borrower cannot influence this himself. If the bank evaluates the property, a fee also applies. In addition, there are the costs for the notary, where the purchase contract is certified. Additional costs may be incurred for interest on arrears, for an early payment if the contract is to be terminated prematurely, for an agency commission, for expenses in the event of a necessary change in registered collateral and for fees for maintaining an account.
The list of additional costs for a home loan is therefore significantly longer than for a classic installment loan. For this reason alone, consumers are well advised to take a close look at the individual items and compare the costs.
How do you find a cheap housing loan?
Anyone looking for a home loan at low interest rates must compare the offers. There is no way around this, because the offers of the banks differ very clearly. This is because lending is an important service for banks where they make money. That is why they are always looking for solvent customers and attract them with attractive offers. This creates fierce competition among providers for solvent borrowers. If you want to find a loan that fits your personal options on the one hand and that is not unnecessarily expensive on the other hand, you have to make the effort to compare the offers.
Whether you get several offers from different banks on site and compare them, or whether you use an online tool for the comparison or whether you even use an independent consultant, is a question of experience and the willingness to deal intensively with the topic , In the end, it often turns out that the effort is worth it, because the interest rates vary greatly depending on the bank. Even a small interest rate difference makes a big difference with a large amount of financing.