As with any other loan, interest is payable on a home loan. Since the loan amounts are usually high and the terms are long, a low interest rate has a particular impact on the total cost of the loan for a home loan. When taking out a home purchase loan, you agree a so-called debit interest rate with your bank. For a certain period of time, you pay the interest rate set when the contract is concluded and you are protected against short-term interest rate fluctuations in the market. In Austria, fixed interest periods of 10, fifteen or twenty years are usually the rule. However, with some banks you can even have the interest rate fixed much longer. Since most home loans have not yet been repaid in full after the fixed interest period has expired, follow-up financing is usually necessary and customary. For this,
Securing and earmarking
In contrast to the classic installment loan, home loans are granted with a so-called earmarking. You must actually use the money borrowed from the bank to buy or build the specified property – or to buy a piece of land. Special collateral is also required for each real estate loan. Banks in Austria also protect themselves against possible insolvency of the borrower when issuing home loans. Usually, this is done either through a mortgage or through a mortgage. With the order of the land charge comes a so-called land charge. The financing bank is ranked first in the land register until the mortgage loan has been repaid in full. In the event of the customer’s insolvency, the bank can use it to sell the property or property itself and retain the remaining debt.
Home loan as annuity loan
Loans for a house or apartment are usually so-called annuity loans. You pay your loan for the house purchase back to your bank in constant monthly installments. The repayment rate, also called annuity, always consists of an interest component and a repayment component. However, the ratio changes during the term of the house loan: if the interest portion is usually very high at the beginning, the interest burden becomes less and less as the remaining debt. As a result, the repayment share rises more and more in the course of financing. The initial repayment is usually given as a percentage of the total. Tip: Which repayment you choose should depend on the interest level and your financial options as a borrower. You should use the currently low interest rates for a higher repayment. Because: The higher the initial repayment rate, the faster you are debt free.
Other house financing costs
In addition to the annual interest rate on the building loan, you may also incur additional costs for a home loan. For example, so-called commitment interest, if you do not take your loan amount immediately, but after a few months. Or also a so-called prepayment penalty: These require savings banks and Co. as compensation for lost interest income if you terminate your building loan before the agreed interest period has expired. The property itself also incurs additional costs. For example, through taxes and insurance for house and land acquisition, the notary or the entry in the land register. Tip: When planning your house financing, include additional costs of at least 15 percent of the total. In this way, you are protected from sudden surprises and may avoid expensive refinancing.