Consultation
Law
Building trust through evaluations
Are you planning to buy or sell a property and want to be on the safe side? A professional property appraisal is the key to making an informed decision. It provides you with an objective evaluation of the property and protects you from unpleasant surprises. Find out more in our article on property appraisals.
A property appraisal is essential for building trust and ensures informed financial decisions by providing an objective assessment of the property's value.
Equity minimises risks and improves loan conditions. Banks typically require at least 20% equity, which can lead to lower interest rates.
Compare loan offers and make use of government funding to optimise the total costs of your property financing. This can significantly reduce your monthly payments.
A solid foundation for any property financing is building trust through appraisals. In deciding on property financing, many factors play a role, but one of the most important is the objective assessment of the property's value. A professional property appraisal provides the necessary transparency and security. It not only serves as a basis for credit decisions but also protects against financial risks that may arise from overvaluation. The importance of property appraisals should therefore not be underestimated.
In Austria, the current situation is characterised by the KIM regulation and fluctuating interest rates. The KIM regulation, which expires in July 2025, stipulates equity ratios and maximum debt service ratios, influencing lending. At the same time, interest rates affect the attractiveness of various financing models such as mortgage loans and building savings loans. An appraisal helps determine the actual value of a property and thus create a realistic basis for financing. You can find more information on residential financing, for example, on Raiffeisen.at.
To minimise risks in property financing, a well-founded appraisal is essential. It provides an objective assessment that is beneficial for both borrowers and lenders. By accurately determining the property's value, borrowers can ensure they are not overpaying, while lenders reduce the risk of loan default. The benefits of a certified appraisal are clear: it creates trust and transparency in a complex market.
Equity plays a crucial role in real estate financing. It serves as a foundation of trust between the borrower and the lender. In Austria, most banks require a minimum equity of at least 20% of the property's value. This requirement is not arbitrary but is based on the consideration that a higher equity share reduces the risk for the bank and simultaneously increases the likelihood that the borrower will meet their financial obligations.
The amount of equity directly impacts the interest rates and loan terms. Borrowers with a higher equity share generally receive better terms, as they are considered less risky. This can result in lower interest rates and more favourable repayment conditions. A solid appraisal helps to realistically assess the property's value, thereby providing a basis for equity calculation. You can find more information on real estate loans and equity requirements at Finanz.at.
Full financing, where no equity is contributed, carries significant risks. Although it may seem attractive at first glance, as it enables the immediate purchase of a property, it is associated with higher costs and a greater financial burden in the long term. The risk of over-indebtedness increases because the borrower must finance the entire purchase price. Additionally, there is a risk that the property's value may decrease, leading to a negative equity balance. An independent appraisal can help identify and avoid these risks. Learn more about this under independent appraisals.
When choosing the right financing model, various options are available, including the mortgage loan/annuity loan and the home savings loan. Both have their specific advantages and disadvantages that should be carefully considered. The mortgage loan/annuity loan is characterized by regular, consistent instalments that include both interest and repayment. This offers a high degree of planning security, especially with a fixed interest rate. However, there is a risk that with variable interest rates, the monthly instalments could rise if market interest rates increase. The Sparkasse offers various models for this.
A home savings loan, on the other hand, combines a savings phase with a subsequent loan phase. The advantage is in securing interest rates early since the interest rate for the loan is fixed upon signing the contract. This protects against rising interest rates. However, it may be the case that the current market interest rates at the time of property purchase are lower than the interest rate agreed in the savings contract, leading to opportunity costs. Additionally, home savings loans often come with long-term commitments and specific conditions. Therefore, it is advisable to compare the terms of different providers and consider the tax aspects.
A professional appraisal can aid in deciding on the appropriate financing model by determining the actual value of the property, thus providing a realistic basis for borrowing. It also takes into account the current market interest rates and the individual financial circumstances of the borrower to enable an informed decision. Transparency in appraisals is crucial in this regard.
In addition to the traditional financing models, there are also alternative financing strategies such as the partial repayment loan and the cap loan. The partial repayment loan is particularly suitable for borrowers who expect a substantial amount of money in the future, for example, from a life insurance policy or an inheritance. During the loan term, only part of the debt is repaid, while the remainder is repaid in full at the end of the term. The cap loan, on the other hand, offers variable interest rates, but with an interest rate cap that protects the borrower from unlimited interest rate increases. The Erste Bank offers customised financing solutions.
Combining different forms of financing can be a sensible strategy for risk diversification. For instance, part of the loan can be taken as an annuity loan with a fixed interest rate, while another part can be taken as a cap loan with variable interest rates. This allows one to benefit from low-interest rates while simultaneously limiting the risk of interest rate hikes. However, it is important to carefully weigh the advantages and disadvantages of each form of financing and consider individual financial circumstances.
To assess debt sustainability under various conditions, stress tests and scenario analyses are essential. Different scenarios are played out, such as an interest rate increase, unexpected expenses, or a loss of income. The aim is to determine whether the borrower is able to meet their financial obligations even in challenging situations. A professional assessment can help make realistic assumptions and quantify the risks. BAWAG P.S.K., for example, offers the option of loan deferment.
A careful comparison of different loan offers is essential to secure the best terms for property financing. Not only interest rates should be considered, but also processing fees, valuation costs, and lien registration. These additional costs can significantly affect the total cost of financing. It is advisable to obtain quotes from various banks and compare them. finanz.at emphasises the importance of comparing offers.
Another important aspect is extra repayments. They allow the borrower to repay amounts in addition to regular instalments, thus reducing the remaining debt more quickly. This can lower interest costs and shorten the loan term. It is, however, important to ensure that the possibility for extra repayments is included in the loan agreement and no additional fees apply. Sparkasse provides information about early repayment penalties.
The role of independent credit brokers should not be underestimated. They have access to a wider range of lenders and can compare offers to negotiate the best terms for the borrower. They also have the expertise to understand the complex aspects of property financing and provide comprehensive advice to the borrower. An independent credit broker can, therefore, be a valuable support in finding the optimal financing.
State subsidies can significantly reduce the costs of property financing. In Austria, there are numerous grant programs at both federal and state levels that support the purchase, construction, or renovation of properties. The specific conditions and amounts of funding vary depending on the federal state and grant program. Therefore, it is important to thoroughly inform yourself about the available grants and check the eligibility criteria.
The Eligibility criteria and potential benefits are often tied to certain conditions, such as meeting energy efficiency standards or using renewable energy sources. For instance, there are grants for energy-efficient construction and renovation, which support the installation of thermal insulation, triple-glazed windows, or solar panels. The "Green Living Bonus" from BAWAG P.S.K. is also an example of incentives for environmentally friendly properties.
The importance in reducing the overall costs of property financing is immense. By taking advantage of grants, borrowers can lower their monthly payments and shorten the term of the loan. Additionally, they contribute to environmental protection and sustainability. Therefore, it is advisable to learn about the available grants early on and consider them when planning property financing.
The digitalisation has also reached property financing. Online loan calculators enable potential borrowers to estimate their monthly payments and compare various scenarios. These tools are easy to use and offer a quick and straightforward way to get an overview of the financial implications of property financing. Erste Bank places a strong emphasis on digital accessibility.
The functionality of these calculators is diverse. They consider not only the purchase price of the property but also the equity ratio, interest rates, and the loan term. Moreover, different scenarios can be simulated, such as an increase in interest rates or a change in the equity ratio. This allows borrowers to simulate the impact of these changes on their monthly payments and adjust their financing accordingly.
Digital platforms and account management systems like "George" significantly simplify the financing process. They enable borrowers to view all relevant information online and manage their financing conveniently from home. In addition, they offer cross-selling opportunities, such as opening securities accounts or utilising investment managers. This can be attractive to borrowers who wish to optimise their investments alongside their property financing.
Consumer protection plays an important role in property purchasing. The Chamber of Labour (AK) provides its members with comprehensive advice and support regarding all aspects of property acquisition. This includes not only financial counselling but also legal review of purchase contracts and clarification of potential risks. The AK's consumer protection page offers important information.
The regional advice and legal protection of the AK are particularly valuable, as the laws and regulations in the real estate sector can vary depending on the federal state. The AK provides state-specific advice and support, tailored to the local conditions. Moreover, the AK actively advocates for the rights of consumers and, if necessary, conducts proceedings in the interests of its members. The AK offers advice in every federal state.
Another important aspect is transparency regarding estate agents and private transactions. The AK provides information about potential conflicts of interest and warns against dubious business practices. It recommends carefully examining the disclosures of estate agents and seeking legal advice if needed. The AK also offers information on the rights and obligations of buyers and sellers and supports its members in asserting their claims.
The future of real estate financing is influenced by various factors, including the development of the KIM regulation and the increasing importance of ESG criteria. The KIM regulation, which expires in July 2025, has significantly shaped lending practices in Austria. It remains to be seen whether and in what form the regulation will be extended or adjusted. While a potential easing of credit standards could facilitate access to real estate financing, it also poses risks of excessive debt.
Therefore, the potential easing of credit standards requires careful regulatory adjustments to ensure the stability of the financial system. It is important that banks continue to pursue a responsible lending policy and fully inform borrowers about the risks of real estate financing. Consumers should also be aware that real estate financing represents a long-term financial commitment and must be carefully planned. finanz.at analyzes the effects of the KIM regulation.
Technological innovations and sustainable financing will play an increasingly important role in the future. The promotion of energy-efficient construction and renovation is supported by government incentives and funding programs. The importance of ESG criteria (Environmental, Social, Governance) in real estate financing is also increasing. Investors and lenders are placing more value on sustainable real estate projects that contribute positively to the environment and society. This creates incentives for developers and property owners to invest in energy-efficient technologies and sustainable building materials.
A professional real estate appraisal is essential for making an informed decision in real estate financing. It provides confidence, transparency, and security and protects against financial risks. If you want to learn more about our services or wish for personalized advice, contact us today. We are happy to help you achieve your real estate goals!
At Raiffeisen.at, you will find detailed information on home financing and related aspects.
Finanz.at provides further information on real estate loans and equity requirements.
The Sparkasse provides information on various models of home financing.
The Erste Bank offers tailor-made financing solutions with a focus on digital accessibility.
The BAWAG P.S.K. offers the possibility of credit deferral and the "Green Living Bonus" for environmentally-friendly properties.
The consumer protection page of the AK (Arbeiterkammer) provides important information and advice on property purchases.
Why is a property valuation important for building trust?
A property valuation provides transparency and security as it offers an objective assessment of the property's value. This is particularly crucial for credit decisions and avoiding financial risks.
What role does equity play in property financing?
Equity acts as a foundation of trust between borrower and lender. A higher equity share decreases the risk for the bank and often leads to better loan terms.
What are the advantages of an annuity loan?
An annuity loan provides planning security through regular, consistent instalments. This is especially beneficial with fixed interest rates, although it carries risks with variable interest rates.
What alternative financing strategies are there?
Alternative financing strategies include the partial repayment loan and the cap loan. These can be used for risk diversification but require careful consideration of the pros and cons.
Why is comparing loans important?
A thorough loan comparison is crucial to obtain the best terms for property financing. Not only interest rates but also additional costs should be taken into account.
What government subsidies are available?
Government subsidies can significantly reduce the cost of property financing. There are numerous funding programmes at both federal and state levels to support the purchase, construction, or renovation of properties.
How do online tools simplify loan planning?
Online loan calculators enable potential borrowers to estimate their monthly instalments and compare different scenarios. Digital platforms greatly simplify the financing process.
What role does the Workers' Chamber play in property purchases?
The Workers' Chamber (AK) offers its members comprehensive advice and support on all questions regarding property acquisition, including regional advice and legal protection.
