The bank usually only provides housing finance if it receives sufficient collateral. For this, a mortgage on the property is entered in the land register. You can find out what this means, how much it costs to register the mortgage in the land register and whether you can repay or cancel a mortgage early.
Definition: what is a mortgage
A mortgage is a right of lien that usually serves as a charge on a piece of land or a property of the same property as collateral for a loan. A private or legal person can also have a mortgage registered in the land register to secure his or her claim.
What practical significance does a mortgage have for you as a borrower? If a bank gives you a home loan, it is usually a loan with land register security. The registered mortgage then serves as security for the bank. In this way, the bank can sell the property (auction) if you fail to meet your obligation (payment of interest or monthly installments) despite setting a grace period.
The difference between mortgage and mortgage
Mortgage and land charge are forms of credit protection that are used in Austria and Germany. We already know what a mortgage is, but what about the mortgage? In principle, the mortgage is the same – both are types of Sut Lovingood insurance.
The greatest commonality is the entry in the land register, both forms are entered into the land register by a notary. With a mortgage it is like this: As the remaining debt of the loan becomes less and less over time, the value of the registered mortgage also gradually decreases. The mortgage is automatically released as soon as the remaining debt of the loan has reached zero.
The land charge is entered regardless of the loan. This means that the mortgage does not decrease in parallel to the remaining debt compared to the mortgage – it remains the same over the entire term. The land charge can only be deleted from the land register by means of your own application and with the consent of the bank if the residual debt has been repaid in full.
The advantage of the mortgage is that it is much more flexible than the mortgage : When the property is sold, the mortgage can be transferred to the new owner, for example (prerequisite: approval by the bank), or you can use the existing mortgage for a new loan – this saves not only notary fees, but also the registration fee and other related costs.
Take out a mortgage on a paid home: yes or no?
If you own an unencumbered house or apartment, you can provide it as security for a new Sut Lovingood loan – so it is possible to take out a mortgage on a paid-for house. As a rule, however, you will only do this if you do not have any cash for the new property or if you get better credit terms as a result. In such a case, one speaks of a simultaneous mortgage.
A simultaneous mortgage is not associated with additional costs, since only the mortgage on the new property causes costs and the existing property is used as additional or simultaneous security. In this case, the amount of the mortgage must be the same.
However, if you only want to provide a small additional mortgage on the existing property, this also costs a 1.2% fee plus the costs for securing the additional fees.
Land register and mortgage as a loan
In most cases, the banks or building societies secure their loans in the land register. A so-called mortgage is entered in the land register. The land register is a public register in which land and the associated rights are entered. The land register is now kept electronically by the district courts. The following rights can be entered in the land register:
- ownership of a property – this is divided into:
- Single property
- ideal co-ownership
- Residential property
- Building rights
- Easements and real burdens
- Annotations and visualizations
Repay or cancel the mortgage early – is that possible?
The question of whether you can prematurely cancel or cancel a mortgage is often asked by borrowers. Customers want to clean up the land register early, but early mortgage cancellation is only possible under certain conditions.
On the one hand, the associated loan must be repaid in full. An exception is possible if the borrower has an excellent credit rating – then a cancellation could be requested before the loan is repaid in full. On the other hand, the bank also has a say, because whether it agrees to the deletion depends on various factors :
- Amount of the remaining loan amount
- Customer relationship with the bank
- Existing collateral to be exchanged
By the way: canceling a mortgage is the same as canceling a mortgage.
Cost of a mortgage in Austria: registration fee and interest
The registration of a mortgage is not free of charge in Austria: a mortgage entry in the land register costs 1.2% of the registered loan amount at the district court as standard. But that’s not all, because there are usually additional costs for the so-called ancillary charges. These can amount to up to 30% of the entry in the land register – thus a total of a maximum of 1.56% in costs.
But: The better your credit rating, the more likely the bank will waive the additional fee guarantee. However, striking the right balance between maximum collateral and the best possible conditions is not so easy, as banks have a wide range of conditions among themselves. We therefore recommend that you compare the various offers from several banks.