What types of mortgages are available in Austria?
The mortgages available in Austria include three different types of mortgages, all with their own features and advantages for you to consider. These are:
Fixed-rate mortgages are a popular choice for borrowers seeking stability and predictability in their monthly mortgage payments. With this type of mortgage, the interest rate remains constant throughout the agreed-upon term of the loan, which is typically 10, 15, or 20 years. This means that regardless of fluctuations in the broader interest rate market, your monthly payments remain consistent, making it easier to budget and plan for the future. Fixed-rate mortgages provide borrowers with a sense of financial security, as they know exactly how much they will pay each month. These mortgages are particularly suitable in a low-interest-rate environment, as borrowers can lock in favorable rates for an extended period.
Adjustable-Rate Mortgages (Variable-Rate Mortgages):
Adjustable-rate mortgages, also known as variable-rate mortgages, offer a different approach to interest rates. In this type of mortgage, the interest rate is tied to a reference index, such as the Euribor (Euro Interbank Offered Rate). The rate can change periodically, usually on an annual basis. The advantage of adjustable-rate mortgages is that they often start with lower initial interest rates compared to fixed-rate mortgages. However, the interest rate can fluctuate over time, potentially leading to higher monthly payments if market rates rise. Borrowers who are comfortable with some level of interest rate uncertainty or anticipate lower interest rates in the future might consider adjustable-rate mortgages.
Mortgage Combination (Two-Loan Mortgages):
The mortgage combination option merges two different mortgage loans into a single package. One part of the loan is usually a fixed-rate mortgage, while the other part is an adjustable-rate mortgage. This option allows borrowers to benefit from both the stability of fixed payments and the potential for lower initial rates offered by adjustable-rate mortgages. This type of mortgage offers a degree of flexibility and diversification in managing interest rate risk.
Please note that Austrian mortgages are structured as full repayment mortgages, meaning that each mortgage payment covers both the interest and principal repayment. Unlike interest-only mortgages, where only the interest is paid during the term of the loan, Austrian mortgages ensure that the loan is fully repaid by the end of the term. This approach allows borrowers to gradually build equity in their property.