Looking to buy a new home in the Land of Mozart? This complete guide to getting a mortgage in Austria explains how to make that dream a reality.
If you are hoping to buy a home in Austria, you will of course need to start researching and exploring your mortgage options before you begin your search. Fortunately, setting up a mortgage in Austria is a fairly straightforward process, particularly if you are an EU citizen. If you are from outside of the EU, however, you may face bigger challenges. That’s not to say it isn’t possible, though, and this handy guide is here to explain all.
This guide covers everything you need to know about mortgages in Austria, including the following information:
- Mortgages in Austria
- Should you buy property in Austria?
- Who can get a mortgage in Austria?
- Types of mortgages in Austria
- Mortgage rates in Austria
- How much can you borrow for a mortgage in Austria?
- Mortgage costs in Austria
- Taxes and tax relief on mortgages in Austria
- Property insurance in Austria
- Mortgage repayments in Austria
- Useful resources
Mortgages in Austria
As mentioned, setting up a mortgage in Austria is a pretty simple process, particularly for expats who are already EU citizens. Expats from outside of the EU can also apply for a mortgage, however, the process is more complex and lengthy.
Typically, fixed-rate mortgages are popular in Austria and will finance up to 70% of the property for between 15 and 30 years. A 20-year term is typical, but you can get up to a 30-year term if you prefer. Buyers also have the option to suggest the duration to their bank. Adjustable-rate mortgages are another option, and although they are riskier in the long term, they have a lower initial rate of interest. There are also combination mortgages, which –as the name suggests – combine the two.
Should you buy property in Austria?
Essentially, investing in real estate in the alpine haven that is Austria is a smart move, particularly if you are going to live in it. The top tier healthcare, high quality of life, and breathtaking natural scenery all make Austria a very attractive place to reside. There are also plenty of affordable properties compared to other European countries, particularly if you are prepared to look outside the big cities like Vienna and Salzburg.
Furthermore, there are very few restrictions on foreigners purchasing properties, once you have jumped through the hoops. Austria also makes the process straightforward so you will know where you stand once you have made your decision on where to buy.
Who can get a mortgage in Austria?
Generally speaking, most banks in Austria insist on residency as a condition of approving a mortgage. They also tend to enforce the Euro income policy. However, a residency can be secondary. Additionally, it can be a business that is incorporated in Austria. Sometimes, couples decide to apply for a mortgage when one is a resident in Austria while the other keeps another citizenship.
Significantly, foreigners are eligible for a loan in Austria. If you are an EU citizen, things tend to be simple. However, other foreigners face bigger challenges. In recent years, there has been lobbying from banks to make it easier for overseas buyers to use different currencies to get a mortgage.
Getting a mortgage as a foreigner in Austria
Mortgages in Austria are fairly straightforward to set up. However, if you are not from the EU, you will be a greater risk for the bank. This means that they will ask for further documentary evidence. There are also some regions in Austria where foreigners are not able to purchase property. For more information, you can read our Guide to buying real estate in Austria.
To begin with, it’s a good idea to open a bank account with a European bank to make the overall process easier. Then, you should obtain a special permit for property acquisition from the local Land Committee (Grundverkehrskommission). This will indicate whether you intend to use the property for business or residential purposes. However, if the property will be your permanent home, this isn’t necessary. Finally, you will need to submit your documents to the bank. You can find more information about these documents further down the guide.
Types of mortgages in Austria
There are three types of mortgage available in Austria, as follows:
This is the most common type of mortgage in Austria and typically covers 15 to 30 years, however, this is flexible depending on the bank you choose.
This type of mortgage offers a lower initial rate of interest but is riskier in the long run. It is also known as floating-rate mortgages, and the interest rate follows the Euribor (Euro Interbank Offered Rate). These floating rates are recalculated every three months; therefore, the benefit is that the Euribor could drop, meaning that you can pay back your loan ahead of schedule. On the flip side, however, the Euribor could rise, leading to overpayments for you.
This option is simply a mixture of the two types of mortgage detailed above. Essentially, a combination mortgage meshes the two loans together into agreed terms. You can choose what you need from the two mortgages and work out a specifically curated loan that works for you. For instance, 60% of the loan is paid on a fixed interest during an agreed period, while the other 40% is paid at an adjustable 1.5% + Euribor. This type of mortgage is available for both commercial and residential use and will also apply if you are looking for a loan on a second residence or to renovate your current home.
Mortgage rates in Austria
Mortgage rates in Austria are generally very favorable. Typically, they range from between 2 and 4%. However, as of September 2020, the mortgage rate reached a low of 1.28%. Essentially, mortgage rates rise up and down according to the financial stability and reliability of the borrowers. Other factors include inflation, economic growth, monetary policies, and the overall conditions of the housing market.
However, the current mortgage rate in Austria is around 1.5%. Comparatively, in Russia, the mortgage rate in December 2019 reached 9%, which for Russia was a record low.
How much can you borrow for a mortgage in Austria?
Typically, for a fixed-rate mortgage in Austria, you can borrow up to 70% of the property. The down payment should cover no less than 30% of the property purchase value. On average, the down payment will be 40% for a new-build property and 50% for a secondary home. Credit payment periods are generally up to 35 years. Ordinarily, the size of the loan capital in Austria starts at €25,000, but there are no upper limits for the loan size.
If you already own property in Austria, you can use it as security for the loan. For borrowing, your existing monthly outgoings and monthly repayment on your mortgage – combined – should not exceed 40% of your gross monthly income. Any incoming investments and rent can offset this percentage as well.
Online mortgage calculator
You can use this handy European Mortgage Calculator to work out how much you can borrow.
How to apply for a mortgage in Austria
In Austria, mortgages are offered by joint-stock banks, state mortgage-issuing institutions, and building societies. With 809 credit institutions and nearly five thousand branches to choose from, you certainly have a wide range of options for your mortgage needs.
To obtain a mortgage loan in Austria, you will need to submit the following documents to the bank:
- signed property sale agreement (or signed offer to purchase)
- proof of salary (for employees) or proof of company income (for business owners)
- savings account statements
- any other property contracts you own
All foreign-language documents must be translated into German and notarised. Companies such as Lingoking can provide a fast and flexible translation service to assist you with your documents. Notably, applications for mortgages usually take two to three weeks.
Banks offering mortgages to expats in Austria
- Bank Austria – this is the largest and most accessible bank in Austria. This behemoth offers specific expat-focused accounts and may be able to offer you a mortgage.
- Erste Bank – another major player on the financial front in Austria. You can also open an account online.
As an expat, you might be interested in a more familiar bank, such as one of the following that operates in Austria:
Furthermore, The Family Building Society also helps expats to secure mortgages in Austria from the UK.
Mortgage costs in Austria
Fees for your mortgage in Austria will include a one-time bank fee for a loan. Typically, this will be between 1 and 3%, depending on the loan amount. However, for more complex agreements, financing agents may take as much as 3% of the credit amount from the client.
The entry of credit conditions in the Land Register will cost you 1.2% of the mortgage. Some banks will also charge for an assessment of the property. This will be between 0.5 and 0.8% of the loan amount.
Taxes and tax relief on mortgages in Austria
In Austria, those who buy or own a home benefit from favorable tax treatment. Depending on the size of the home you purchase, you can get tax deductions on your mortgage interest payments for expenses incurred for the construction or regeneration of your property. Austria has also implemented a taxation regime on the sale of non-business real estate property with grandfathering-rules. For instance, on ‘new property’, the sale of the property is taxable at a rate of 30%.
All residents in Austria are subject to Austrian income tax on their worldwide income, including income from employment, investments, and property. Non-residents, however, are only subject to tax on income from certain sources in Austria.
In addition, there are grants for home-buyers in each municipality. For instance, in Vienna, low-income residents can apply for a housing benefit scheme. If you are not an Austrian citizen, however, you must have lived in Austria for five years to be eligible.
Property insurance in Austria
Home insurance is mandatory for real estate in Austria as a condition of your mortgage. This will cover damage to your house or apartment, as well as liability. Generally, Haushaltsversichering (household insurance) is also a good idea when you purchase a new home.
Mortgage repayments in Austria
In Austria, you can usually repay part or all of your debt early. This allows you to stop paying interest on outstanding debt, or move to a more favorable offer. This applies even if it is from a different lender. That said, depending on the type of mortgage you have and your bank, you may need to pay a penalty.
Currently, due to the global coronavirus pandemic, Austria is offering a moratorium on loan repayments. To qualify, you have to prove that you have suffered a loss of income due to the exceptional circumstances of the pandemic and cannot reasonably repay your loan.