Answering these questions trips up a lot of people. Many think free credit calculators online give the right answer, but here’s the catch: those numbers are just rough guesses because every bank looks at credit in its own way. When checking offers from different banks, the numbers can jump around a lot—sometimes by thousands of dollars—making home financing feel like a roller coaster. Getting solid, trustworthy numbers means knowing how banks really size up credit. The more secrets uncovered about their game, the easier it gets to pick the best deal for your dream home. Dive in to find insider tips that could keep a big chunk of cash in your pocket down the road.
Credit and house financing: What the credit amount depends on.
To answer this question, you need to know what banks value most. The banks first check the so-called creditworthiness and credit-worthiness for every credit request for house financing.
What is creditworthiness?
Creditworthiness is the ability of a (natural or legal) person to legally conclude credit agreements. Basically, in Austria you are fully contractually capable from the age of 18 and therefore in a position to take out a loan. A further prerequisite for creditworthiness is the intellectual constitution.
What is creditworthiness?
Creditworthiness is the ability to repay a loan. Creditworthiness is primarily defined by a rating with which you are rated by the bank. Especially with the larger amounts of a house financing also a higher risk arises.
Rating
In finance, the rating is the classification of the creditworthiness of a borrower. The rating is carried out by the credit institution. The better the credit rating, the more likely you are to receive a loan.
Affordability: tips on house financing through credit
In order to answer the question “How much credit do I get?”, it must be broken down into three sub-questions, which you can also ask individually.
What is my desired rate?
When taking out a loan, you should ask yourself how high your desired rate should be. Some customers also speak of a feel-good rate. This is often put in relation to the rent to be paid so far. Most credit applicants accept a 20% higher credit rate when financing real estate. Since rents in Austria are now very high, you already have a good starting position.
How high can my maximum rate be?
What is my maximum pain threshold or maximum credit rate? This question is particularly important for you in order to find the right financing model.
Financing model
By the right financing model, we mean either variable or fixed-interest financing. A variable-rate loan has a higher risk, as your installment obligations increase as interest rates rise. A fixed-interest loan could reduce the risk for you here and ensure good calculability. We speak of fixed interest terms of up to 30 years.
How much equity can I save in one year?
This question is particularly important because the amount of funds saved each year enables you to make ongoing unscheduled repayments. These unscheduled special payments, in addition to the current instalment obligations of your house financing, bring several advantages at once:
- Reduction of the term
- Reduction of the monthly rate
- Reduction of the risk after the fixed interest period
- Accumulation of iron reserves
- Reduction of the running time
As a rule, you can choose whether you want to reduce the term after the unscheduled repayment while maintaining the same credit installment.
This improves the overall burden and is often requested by customers with a good income situation, as earlier repayment of the loan is the top priority.
Reduction of the monthly rate
If you prefer to reduce the monthly rate after the unscheduled repayment, then this is the second option. You will choose this option if you have a lower monthly income at the time of the unscheduled repayment or if you wish to reduce your total monthly expenses.
Risk reduction after the fixed interest period
If you have agreed a fixed interest commitment for your house financing, you must know that after the fixed interest period has expired, the loan will be converted into a variable interest rate.
Since you cannot know how high the interest rates will be in 10, 15 or 20 years, Cash Mart Singapore licensed lender also advise you to plan special repayments for fixed-rate loans. The more you can repay in addition, the lower your risk of being surprised by excessive interest rates in the variable interest phase.
Accumulation of iron reserves
In addition to the ongoing repayment of debts through the monthly loan installments, we advise you to build up a so-called iron reserve. This will help you with unpleasant surprises such as repairs to your house, buying a car, health problems or even career changes.
Additional security for your own house financing
Banks very often differentiate between additional collateral in the form of further real estate and additional collateral in the form of securities or surrender values of life insurance policies. The difference lies in the fact that securities and surrender values of life insurance policies can be turned into money relatively quickly, while real estate cannot be sold immediately. Co-borrowers only improve the borrower’s ability to repay and not the collateral for financing.
