How can Swiss real estate finance in Austria?

(openPR) More and more Swiss citizens are drawn to the Alpine regions of Austria to buy real estate there. But what financing options are available to them?

In an interview with Reto Seematter, a financial expert at finanz-vergleich.chwe learn more about the various options that Swiss people have when it comes to financing real estate in Austria.

The financing options

Once a dream property has been found in Austria, the right financing is necessary. “The financing options consist of either taking out a loan in Austria or a mortgage in Switzerland,” explains Reto Seematter.

Real estate financing via an Austrian bank

Financing through an Austrian bank offers several advantages. On the one hand, the bank can provide mortgage security in the Austrian land register, whereby the property to be financed serves as security. Thanks to its knowledge of the real estate market, the bank can also assess the risk of the financing better than a Swiss bank.

However, there are also challenges, as the national currency in Austria is the euro and there is therefore a foreign currency risk. In addition, real estate loans in Austria differ from mortgages in Switzerland, which can be a disadvantage if you are not familiar with Austrian loan forms.

Real estate financing through a Swiss bank

Another option is to finance the property in Austria through a local bank in Switzerland. This approach offers the advantage that the buyer is already familiar with the mortgage options in Switzerland and the property can be financed, for example, via the house bank.

However, there is the challenge that mortgage security for the property is not possible. A Swiss bank cannot be entered in the Austrian land register to secure the mortgage. Other collateral must therefore be provided, such as real estate in Switzerland.

The differences between Switzerland & Austria

The forms & conditions

“Various financing models are used in Austria for the Financing of real estate used, including annuity loans and home savings loans as well as mixed forms of fixed and variable interest rates,” says Reto Seematter.

In Switzerland, real estate financing is usually done via first and second mortgages, with the first mortgage covering up to 65% of the required financing amount and the second mortgage covering the rest. The interest rates for the second mortgage are usually higher because the risk of loss for the bank is also higher.

The rates

In Austria, as a rule, all loans are repaid in full, ie the term and installment amount are chosen in such a way that there is no residual debt at the end of the loan term.

In Switzerland, mortgage amortization is either direct or indirect. With direct amortization, the borrower regularly repays the mortgage debt, which reduces the mortgage and lowers the mortgage interest payable. In indirect amortization, an amortization amount is deposited into an account or specified insurance to earn a profitable interest on the money. At the end of the term, the mortgage is paid off using the amount saved.

The conditions

In Austria, borrowers need sufficient creditworthiness for a possible financing commitment, at least 20% of the financing amount in equity, the required collateral and sufficient income (the loan installments may not burden more than 40% of your net income).

In Switzerland, loan-to-value ratio and affordability are two important factors in real estate financing. The loan-to-value ratio determines what percentage of the total cost of the property can be financed by a bank. The remainder must be covered by equity. The loan-to-value must not be higher than 80% of the total costs, which means that at least 20% equity is required.

Affordability refers to the relationship between income and the annual cost of the property. The annual costs (including amortization, interest, insurance, heating and electricity costs) should not exceed one third of the annual salary. When the mortgage is unsustainable because the costs are too high, buyers typically don’t get financing.

The additional costs in Austria

“Both when buying a property in Austria and when financing through an Austrian bank, there are additional costs that buyers should take into account,” emphasizes the expert.

Buyers and borrowers should expect the following additional costs:

• Up to 3% of the loan amount in handling fees for processing and account setup at the bank.
• 3.5% of the assessment basis for real estate transfer tax for the purchase of a property in Austria.
• 1.1% of the purchase price for registration as owner in the land register.
• 1.2% of the deposit amount for the entry of the mortgage security in the land register.
• 1-3% of the purchase price for the registration of ownership and the certification of the purchase contract by a notary.
• 1-1.5% of the purchase price if the purchase contract is drawn up through a lawyer.

Find the ideal financing

“Financing a property in Austria poses a number of challenges for the Swiss. We therefore always recommend potential buyers to seek advice from an expert beforehand,” says Reto Seematter.

It is therefore advisable to first talk to a financing expert about the financing and then to request offers from different banks. Finanz-vergleich.ch offers such free information talks and supports borrowers in obtaining offers and comparing mortgages.