Too short fixed interest rates, too little equity, underestimated the cost of living – mistakes in building finance cost you many thousands of euros. In the worst case, even your home can be completely at risk. We’ll show you common traps and give you 10 tips on how to move happily into your own four walls as a builder and buyer.

Online request for interest rate comparison

Of course, you will also find an inquiry form on our website, after which you will be contacted by the construction finance experts of our partner Good Finance. These then provide you with an extensive interest comparison of all relevant Austrian banks in the area of ​​mortgage lending.

Mistake 1: Wrong financing plan due to missing additional costs


Many a financing plan in Austria has a lot of holes right from the start because it does not include all the costs associated with the construction or purchase of the property.

A common reason: the mere purchase price for the house and apartment is far from being enough. Added to this is the real estate transfer tax of 3.5 percent of the purchase price. Notary and land registry costs also add up to around 1.5 to 2 percent. If a broker brokered your property, the customary local commission comes from around 4.0 percent. These standard incidental costs alone account for up to 10 percent and more of the purchase price.

Tip: Include additional costs in your financial plan. For example, for renovations before moving in or furniture that does not fit in the new apartment or house. The move can also cost a few thousand euros.

Mistake 2: Expensive refinancing due to hidden construction costs


As a builder, you have to be particularly careful to correctly estimate the cost of your property. Studies and studies have shown that construction and performance descriptions in Austria often have glaring shortcomings. Common problem: The so-called fixed price does not include all the services that are necessary for the completion.

Often the costs for the development of the building ground are missing. Furthermore, many builders have to pay extra for setting up the construction site, the soil appraisal, for house connections, site electricity,money and outdoor facilities. It is often difficult for laypersons to recognize this in the respective building contract. If such expenses are not included in the cost plan, you will have to reckon with expensive refinancing.

Tip: Have your construction contract checked by a neutral expert before concluding it. Builder and owner associations, as well as the consumer protection association, provide valuable help here.

Mistake 3: High risk with insufficient equity


The biggest problem with many construction loans in Austria is and remains equity. Sometimes the money of some consumers is not even enough to pay the real estate transfer tax. In the long run, however, this is a risky maneuver for home builders.

Common consequence: With a high credit, the monthly charge is often significantly higher than the comparable rental apartment. Furthermore, banks require borrowers with little equity to pay substantial interest premiums. For full financing of the purchase price, the interest rate increases by up to one percentage point in comparison to conventional 80 percent financing. And nothing can go wrong with financing. If you have to sell your house or apartment unexpectedly after a few years, the proceeds will probably not be enough to pay off the debt. Then the property is gone and the mountain of debt remains.

Tip: For solid financing, you should be able to pay all additional costs including at least 10 percent of the purchase price from your own resources. The more equity you use, the better. And keep a safety reserve of two to three net monthly salaries.

Mistake 4: Low repayment entices excessive credit amounts

Low repayments and long maturities result in small installments. Admittedly very tempting for many home builders. Many banks require a minimum repayment of just one percent of the loan amount per year for loans. The monthly rate is then particularly low – and entices to take out large loans. This means that even average earners can apparently afford the high purchase prices in the big cities.

But: With an initial repayment of just one percent of the loan amount per year, it takes more than half a century before your property is debt-free. If you are lucky as a customer and don’t have to pay a higher interest rate for the follow-up loan that is usually required in ten or 15 years – great.

But if the interest rate rises here, the rate shock threatens. Because you have only reduced your debt at a snail’s pace, as a borrower you need a follow-up loan for a very high residual debt after years – and that can quickly catapult your monthly installment to double. It is not uncommon for many consumers to end their home.

Tip: In the current low-interest phase, afford to pay off three to five percent of the loan amount if possible. If you need the property for retirement provision, you should be debt-free at the latest when you retire. Many banks also offer customers the option of changing the monthly rate during fixed interest rates or making special repayments.

Mistake 5: High-interest rate risk due to short interest rate fixation

Mistake 5: High interest rate risk due to short interest rate fixation

The shorter the fixed interest rate, the lower the interest rate. That’s right because borrowers currently pay 0.5 percent less interest a year for a ten-year fixed-rate loan than, for example, a loan over 20 years. In the beginning, it will surely save money. Nevertheless, you should not rely on the fact that your follow-up loan will still be available at the currently low-interest rates in ten years.

The combination of short fixed interest rates and low repayments is also dangerous. The less debt you pay off as a borrower until the end of the fixed-rate period, the higher the risk of higher interest rates and rates in the future.

Tip: If you can only reduce your debts slowly, you should choose a fixed rate of 15 or 20 years instead of 10 years. For each loan offer, calculate how high your rate will be after the end of the fixed-rate period if the interest rate would increase by one or two percent.

Mistake 6: Rigid credit rates due to lack of flexibility

Many loans offers sometimes have a catch: As a borrower, you may not increase or decrease the rate during fixed interest rates. Furthermore, special repayments are possible at the earliest ten and a half after a certain waiting period.

Such loans are unsuitable for many people interested in real estate. Especially when it is already foreseeable today that the rigid initial rate will no longer fit after a few years – for example when planning family planning for young couples. But sudden illness or job loss can quickly become a serious problem.

The same naturally applies to the self-employed and self-employed with fluctuating income. It is especially important for them to be able to adjust their fixed credit obligations at any time through flexible special payments and repayment rates.

Tip: If possible, explore loans with flexible repayment options. Annual repayments of up to five percent of the loan amount are now possible at many banks in Austria without a surcharge. The same applies to options for lowering or increasing the repayment rate.

Mistake 7: Expensive construction time due to high commitment interest


Many builders call up their loan in stages – depending on when the payments to the construction companies become due. Here, the bank collects twice from you: it charges the agreed contract interest on the loan amount paid out. In addition, it pays commitment interest on the portion of the loan that you as a customer have not yet called up.

This interest rate is usually a uniform three percent a year or 0.25 percent a month. How expensive your construction time will actually vary greatly: Some banks calculate interest from the second or third month after the loan approval. Others only after six or twelve months.

Tip: When comparing real estate loans, also pay attention to when and in what amount banks charge commitment interest. Also try to negotiate the longest possible waiting period for commitment interest in the contract.

Mistake 8: State subsidies are often given away


The state supports young families and those with lower incomes in housing finance. The most important example is the housing subsidies of the federal states by grant or as a loan. Requirements and conditions are very different here. But whoever gets hold of the funding pots almost always saves many thousands of euros.

Nevertheless, opportunities often go unused. Many consumers are unfamiliar with the programs or mistakenly believe that their income will prevent them from doing so. Furthermore, banks sometimes do not refer to the subsidy because they prefer to sell their own more expensive loans.

Tip: You can submit applications for housing subsidies online or directly to the responsible departments of the state governments or in Vienna to the MA 50. Important prerequisites are proof of income, loan approval, building permit, land register entry, and construction plans – as well as documents such as energy certificates or financing plans.

Mistake 9: Excessive interest due to missing credit comparison

Even a small interest rate differentials have a big impact. Builders and borrowers give away the most money in Austria if they only trust their house bank for the financing and don’t explore offers from other banks.

A home finance comparison is almost always worthwhile for you. Because even seemingly small interest rate differentials add up to enormous amounts with large loan amounts and long terms. For example, half a percent of interest on a USD 200,000 loan with a 20-year fixed interest rate will save you around USD 20,000 more.

Tip: Explore the best interest rates for your real estate financing without much effort. With mortgage comparison, you have access to the most favorable conditions of banks and credit intermediaries conditions in Austria.

Mistake 10: Personal contribution is often overestimated

If you help yourself, you can save a lot of money when building your house. That’s right – but not as much as some builders believe. Many overestimate the possible savings, but also the effort and skills. In the worst case, the dream of owning a home fails before moving in, because homebuilders cannot do the work with the best will in the world – and then need expensive help from a specialist.

Studies show: In order to fully exploit the savings potential of around 10 percent, builders have to work around 450 hours on the construction site for an average house of 140 square meters – in addition to a full-time job, it is usually difficult to achieve. Furthermore, floor coverings and tiles are laid, sloping ceilings insulate and clad, or room doors are not for everyone.

Tip: Clarify beforehand with a construction expert whose own work is realistic and sensible. So that there is no trouble afterward, the work must also fit into the construction process and be specified in detail in the construction contract.

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