In Austria, and in many other parts of Europe, there is a notable demand for home ownership, and a mortgage, or a ‘wohnbaukredit’ is seen as normal funding for home purchasing. In fact, all throughout Austria, a wohnbaukredit is the standard method that allows businesses and individuals to purchase commercial or residential real estate, when paying in full value immediately is not an option. The ‘wohnbaukredit’ is a secured loan in that the housing secures the mortgage. Like in all the other types of loans, the ‘wohnbaukredit’ involves a creditor – a bank or a financial institution- and a debtor – the consumer looking to purchase a home or a commercial property. The creditor makes loans available to debtors for the purpose of purchasing real estate, while the debtor, either an entity or an individual, has to pay the interest rates agreed upon. The mortgage, or ‘wohnbaukredit’ may be foreclosed by the creditor, if the debtor fails to meet the conditions of that mortgage, in order to recover the debt. Legal representation may also be involved in this process, due to the legal exchange, which can be fairly complicated. This is one of the reasons why either participant in the ‘wohnbaukredit’ may choose to be legally represented. Given the wide range of options available for ‘wohnbaukredit’ on the Austrian market, the debtor may also choose to be assisted by a financial adviser or a mortgage broker, when trying to find a competitive loan.
Most financial institutions in Austria provide consumers with the possibility to opt for a mortgage in foreign currency, or ‘fremdwährungskredit’. This type of loan represents a source of financing for both corporate and personal mortgages.
In the case of foreign currency mortgage, or ‘fremdwährungskredit’, are based on the specific currency that the mortgage is denominated in, meaning that the constant change of currency exchange rates needs to be taken into consideration before deciding to choose a foreign currency mortgage as a means for housing purchase.
‘Fremdwährungskredit’ can come with either capital saving or capital loss. In the event that the domestic currency strengthens against the currency of the mortgage, the debtors will have to pay less in his/her domestic currency, meaning that he/she can make capital saving. On the other hand, if it is the currency of the mortgage that strengthens against the borrower’s domestic currency, then the borrower needs to pay more, leading to capital loss. This is the reason why, when choosing ‘fremdwährungskredit’, it is highly advisable that the borrower approach a currency manager, who should be able to make use of interest rate savings and debt reduction to pay off the ‘fremdwährungskredit’ within its normal lifetime.
As stated above, the Austrian market provides consumers with a varied choice for loans with the purpose of real estate purchasing. Be it ‘fremdwährungskredit’ or ‘wohnbaukredit’, debtors can choose whatever financial institution or type of loan that meets their demands and needs, and are advised to request specialized assistance when doing so, given the complexity of this market.
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