Debt rescheduling for construction financing in austria

In a rescheduling, borrowers replace one or more existing loans with the bank with a new loan. Debt rescheduling offers the possibility of benefiting from newer models for loans – adapted to the current life situation – and of having to repay less overall.

Especially if a crisis occurs, the already existing financing should be checked for the risk of rising interest rates. The offers of loans in Austria are rich and often not directly comparable. For this reason, borrowers can very well check with the help of an independent expert, whether the rescheduling of debt at the house or another bank is an optimal choice.

Despite the possible compensation and fees, in most cases a debt restructuring is worthwhile because the interest rates are significantly cheaper. Thus installment or overdraft facilities can be paid off and interest saved.

When is a debt rescheduling loan worthwhile in Austria?

  • In general, there are a variety of reasons for people in Austria to improve an existing loan with a debt restructuring. The most common reasons are an optimization of conditions, an alignment of financing with the current life situation and a new risk appetite.
  • Motives for debt restructuring are thus a change in the personal life situation, an extension of the interest period or an optimization of the credit margin. Also the change of liquidity planning can be a reason.

Because the real estate financing with a loan give a high degree of security, they are given by the banks particularly gladly. The market in Austria is fiercely competitive, which is why borrowers have a good chance of getting favorable conditions. However, they should not postpone the planned debt restructuring too long until the rate becomes too expensive. In this case, the conditions offered by the bank will be less advantageous.

Debt rescheduling for construction financing in Austria

@andreyyalansky19 via Twenty20

In the case of an existing loan with a fixed interest rate agreement, it should be noted that the loan is terminated and that mostly expenses have to be paid to the bank. In this case, the rescheduling is only worthwhile if these expenses are in a worthwhile ratio to the interest amount saved.

Especially in the phase of low interest rates, borrowers must consider whether a debt restructuring to a fixed interest rate with longer terms is appropriate. Hereby they can secure such low interest rates in the long run – even if the variable interest rates are more favorable at the moment. A permanent fixation on the low interest level means constancy in the regular expenses for the budget.

In the case of a building society loan, debt restructuring can only be worthwhile to a limited extent. In general, contracts with small loan amounts and short terms can save very little. To reschedule such loans is usually not profitable.

What can be saved with a debt restructuring?

If you compare and check the offers when rescheduling, you can save a lot of money.

Debt rescheduling in Austria is often carried out during the periods of low interest rates. In this case, an already existing loan is cancelled with the taking out of another loan. This means that the borrower takes out another loan and uses the sum to pay off the existing loan. Thus, in the future only one installment will be paid off and this is that of the new loan.

The purpose of debt rescheduling is generally to save interest. It is basically necessary to compare the different loan offers of the various banks with each other, because they often differ greatly from each other. It is especially good if the interest rate of the new loan is significantly lower than the existing rate of the old loan. Thus, the probability of saving, depending on the loan amount, is correspondingly higher. However, here, before the debt restructuring, should be well calculated whether the measure is really worthwhile.

What is the cost of rescheduling an existing loan in Austria??

A loan for a property usually involves quite a large sum, because generally speaking, building a house is not a cheap pleasure. The interest payments are then accordingly very high and the debt restructuring can be a profitable action for this reason.

A significant factor here is the effective interest rate. These are the costs of rescheduling, which actually come to the customer. In that case, they should keep in mind the nominal interest rate and any additional costs such as a new registration of the mortgage in the land register, processing fees or costs for certifications. If it turns out in retrospect that the low effective interest rate would mean a cost savings in a rescheduling of the loan, customers should consider such an option carefully in any case.

However, an effective interest rate alone is not meaningful, because the financial risk always plays a role. If, for example, customers reschedule a loan from a variable repayment to a fixed variant, then they reduce the risk and hedge against changes in interest rates. The interest rate advantage in connection with lower interest rates will reach the customers in that case rather rarely.

In addition, borrowers should review the contract of the existing financing in connection with the contractual penalty for early termination. Such a penalty usually costs between 1 and 5 percent of the amount that customers have to pay to the bank early.

When is a debt restructuring possible in Austria?

Debt restructuring in Austria is generally possible at any time, but there are always exceptions. These apply primarily to loan amounts, which after the 11. June 2010 were taken out. If this is not the case, the signature on the contract took place before that cut-off date. In such a case, the right of cancellation that was valid before applies. Normally, this can be seen in the contracts.

  • The new right of termination in Austria that came into effect on 11. June 2010, states that loans taken out after this date can be repaid in part or in full at any time. However, it should be noted that in this case the bank has the right to enforce a so-called early repayment penalty.
  • This is a special fee that they charge due to the loss of interest payments due to the early payment. However, there are banks in Austria that do not charge such a fee. Accordingly, it should be carefully checked here whether a debt restructuring can still be worthwhile in this case.

Borrowers should exercise caution, especially when applying for construction financing, as different rules apply here. Therefore, such a loan can be rescheduled only with a period of six months. In addition, the early repayment penalty must be paid here as well. However, banks only charge this fee if the loan is redeemed before the tenth year of the actual fixed interest rate period. Now, if the rescheduling is done after the tenth year, it can be done free of charge.

If older credit agreements are available, however, it must be noted that a different right of termination applies here. This means that the borrower has to meet other deadlines in the process.

With a suitable loan comparison calculator for the country of Austria, customers can save a lot of effort and time for the rescheduling loan. These compare quickly all possible offers and find thereby the best variant, which is also really most inexpensive. These can also do this at the bank.
Customers should in any case obtain a financing proposal. Such a statement should contain all the necessary information that borrowers can establish a good disposition of finances.

Many loans with longer maturities are no longer common with the interest rate. These are, for example, housing loans. Over the years, the conditions for this have changed considerably and the interest rates for the money have become much more favorable in most cases. By rescheduling, there is the possibility of benefiting from newer models for the loans and having to repay less overall.

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