How To Get A Mortgage in Austria? Guide for Expats
So you are considering buying a house or investment property in Austria and looking for financing options? Fortunately, the interest rate for mortgages in Austria is only 2,6% making this place very attractive for a real estate purchase. However, not everyone can qualify for financing.
Expats and other foreigners living in Austria can obtain a mortgage if they can deposit at least 20% of the property price as a downpayment. Moreover, monthly loan installments can’t exceed 40% of your disposable income. To qualify, you must live in Austria and have an income in euros.
Getting a mortgage as a foreigner is a very challenging task. Unless you meet the requirements, no bank will work with you. Obtaining a loan is easier if you are from Europe or have been living in Austria for many years while earning a good salary.
Learn more about loans in Austria.
Can foreigners get a mortgage in Austria?
Foreign nationals, including non-EU/EEA and expats from European countries, can obtain a mortgage in Austria, given they meet the requirements.
In July 2022, Austrian banks changed several rules regarding home loans, making getting them slightly harder.
Generally, all borrowers must have at least 20% in downpayment, and the monthly payment may not exceed 40% of the household’s disposable income.
Before offering you financing, a lender will assess your creditworthiness. Based on the results, they would either approve or refuse your request.
The main factors influencing the decision of the bank are your nationality, residence status in Austria, job, years of employment, and salary.
EU/EEA citizens
It’s easier to qualify for house financing as an EU/EEA national. Yet, EU citizens also need a residence in Austria to get a loan. Hence, residency is a condition for approving a mortgage. Besides, EU citizens also need good creditworthiness in Austria to get a loan.
To build up your credit score in Austria, you can open a local bank account, get debit and credit cards, and make sure you pay your bills on time.
Non-EU/EEA citizens
The situation is different for non-EU/EEA nationals. It’s more challenging to obtain a mortgage as a non-European in Austria.
You must have a long history of residing in Austria. Hence a permanent residence permit is preferred by banks. Another crucial factor is that your income must be in euros and your job should be in Austria. That’s the best combination.
You should prove the income for the last three to six months as well as the employment agreement.
In addition, banks often require a higher equity ratio for foreigners. Sometimes they will lend only up to 60% of the property price. That means that you have to provide another 40%.
Mortgage deposit
How much deposit do I need to buy a house in Austria? Current regulations require all home buyers to deposit at least 20% of the property’s value when applying for a mortgage.
For foreign nationals, that can be even 40%-50%.
How much do houses cost in Austria? Read our guide to find out.
Types of mortgages in Austria
Mortgage loan (Hypothek)
A mortgage loan is a typical way of financing a house if you need to lend a significant amount. In that case, you will receive cash from the bank, and the property will serve as collateral.
The average term of this type of financing is from 15 to 25 years. The interest rate and term are agreed upon in advance. During the term, you pay installments in the same amount.
A mortgage offers variable or fixed interest rates. However, a fixed interest rate is preferred by borrowers. That way, you can plan the financing long-term and don’t worry about rising interest rates.
Variable interest rates can be advantageous if they change over time in your favour. But it can also be another way around.
To take a loan, you should have between 20-50% of the property value in the equity. Alternatively, you can also take out life insurance.
Construction loan (Baufinanzierung)
Construction financing is different from a traditional mortgage. In that case, a bank lends you money to purchase or build a house, and the property serves as collateral.
Construction loans are so-called annuity loans, meaning you pay the same monthly payment over the term. The term can range from 5 to 30 years. In order to get a fixed interest and installment, you need to sign a building contract before taking out a loan.
Banks estimate the conditions and terms for construction financing on an individual basis, depending on the loan amount, the equity capital, etc. You will get the best offer with a good credit score and a high equity ratio.
Because your future house is collateral for the bank, you will get better conditions for the financing compared to the mortgage. Keep in mind that banks have a right to sell your property if you can’t repay the loan.
Some established Austrian banks that provide construction financing include:
- Raiffeisen
- S-Bausparen
- Wüstenrot
- Start:bausparkasse
Largest Austrian banks:
- Erste Bank
- Bank Austria
A mortgage usually starts from €50,000. Anything below this amount is considered a personal loan. How much can you borrow for a new house?
Buyers can lend even a million EUR, assuming they have enough money for a deposit. Moreover, the loan can not exceed the value of the property and land.
Other expenses why buying a home in Austria
Whether you are buying or building a house in Austria, there are many costs that get involved. For instance, construction costs are the major consideration when taking out a loan. Here you also need to include the price of the land and the brokerage fees.
In addition, the bank charges a one time of 1%-2% for giving you a loan.
They vary significantly depending on the region but generally are from 3.5% to 6.0%. Most brokers charge a fee of 6%. In addition, a buyer should pay the notary, the cost for a land register entry, and the land acquisition tax.
- Notary: 2.0% – 5.0%
- Land register entry: 1.1%
- Land transfer tax: 3.5%
The expenses for a notary and Land register entry are about 1.5%, and the land transfer tax is 3.5%
In total, you can calculate an additional 10% of the purchase price for other expenses.
Changes to mortgages in Austria in 2022
Since July 2022, obtaining a mortgage in Austria has become more challenging for both foreigners and locals. The changes were made to the minimum deposit, which is now 20% of a property value, including additional costs. The downpayment is mandatory to get the mortgage.
Moreover, the mortgage repayments now can’t be higher than 40% of the buyer’s income. For example, based on this calculation, someone needs an income of €3,250 net per month to purchase a property for €360,000, which is a very conservative price for Austria.
€3,250 net per translates to a gross wage of €5,500 per month. Salaries of this amount are pretty uncommon in Austria. Half of the households won’t qualify for a mortgage.
Furthermore, since July 2022, the maximum term for a mortgage is 35 years. That said, loans for up to €50,000 are exempt from these rules.
Mortgage rates in 2022
In September 2022, the mortgage rate in Austrian banks was 2,625%. Overall, the rate can range from 1% to 6%. In contrast to other loans. e.g., personal loans, mortgages are very affordable in Austria.
According to the Austrian National bank, interest rates for mortgages in Austria have been developing in recent years. Although the rate was on a rise, it’s still less than 2,75%.
Requirements for a mortgage in Austria
To obtain a mortgage as a foreigner in Austria, you must meet certain requirements, the main of which are:
- Passport, ID, or driver’s license
- Main residence in Austria
- Proof of income
- Employment contract
- Passport, ID, or driver’s license
- A current account with an Austrian bank
- Good credit score
The primary documents are the proof of income over the last years as well as a list of costs and financial obligations that you currently have.
Getting a mortgage as a foreigner in Austria
The best place to start your mortgage hunt in Austria is to go to your current bank and talk to the financing specialist. They might tell you straight away whether you have a chance to quality or not yet.
To see current offers, you can use an online loan calculator like Durchblicker. They compare loans and mortgages among all Austrian banks and give you the best offer. Besides, you can find all types of loans on the platform, including:
- The housing loan calculator – for buying, building or renovating the house
- The car loan calculator – to buy a new or used car
- The consumer loan calculator – find an affordable way to finance furniture, a computer, a fancy vacation, or something else
The maximum loan you can apply for with Durchblicker is €1,000,000.
Documents you need for a loan
To get at least an estimate for a mortgage in Austria, you must submit the following documents to the bank:
- Passport or ID
- Proof of salary (for employees) or proof of company income (for business owners)
- Sale agreement or purchase contract
- Information about your monthly expenses and other debts
- Savings account statements
If you already spoke to your bank, you can go ahead and sign the sale agreement with the seller. After that, the process will look as follows:
- Property value assessment to estimate market price and liquidity.
- Application for the mortgage; it usually takes between 2-3 weeks.
- Submitting the sales offer (Kaufanbot) followed by the sale and purchase agreement with a notary.
- Signing of the loan agreement at the bank.
Also read our article on getting a personal loan in Austria.
