Residential construction financing for cross-border commuters

Cross-border commuters: work in Switzerland or Liechtenstein, property in Vorarlberg

Cross-border commuters commute between two countries and receive their salary in the currency of the place of work. Many Austrian cross-border commuters live in Vorarlberg and commute to Switzerland or Liechtenstein. Quite a few cross-border commuters would like to fulfill their dream of owning their own home or condominium in Vorarlberg – despite the high property prices. There are a few things to consider when financing residential construction for cross-border commuters. Martin Häusler is a specialist in construction financing at the credit broker B-Quadrat in Dornbirn and knows what cross-border commuters need to pay attention to.

Mr. Häusler, what are the special features of cross-border commuters who work in Switzerland or Liechtenstein and buy or finance a property in Vorarlberg?

Martin Häusler: As real estate prices are very high in the Rhine Valley and now actually throughout Vorarlberg, a high income and equity of at least the ancillary purchase costs, which is usually around 10%, are necessary for financing. Cross-border commuters usually have this, as wages in Switzerland and Liechtenstein are significantly higher than in Austria. The good credit rating therefore makes cross-border commuters attractive to banks. You also benefit from a special feature when it comes to pensions. There is a withdrawal option from the second pillar, the pension fund, for owner-occupied housing. Although the withdrawal must be taxed, you bring in additional capital that can be used for financing.

When Austrian banks finance real estate for cross-border commuters – is it in euros?

Martin Häusler: For the most part, yes, because financing in euros gives you more options and, as the property is also valued in euros, the loan remains constant in relation to the property and does not change in the event of currency fluctuations.

However, if the salary is paid in Swiss francs and the loan is based on euros, there are of course risks due to the different development of the currencies. In some cases, this is not without danger. However, there are also banks that offer loan agreements in Swiss francs. This has the advantage that the currency risk between Swiss income and loan installment is excluded and the loan or repayment is stable.

So should cross-border commuters prefer to take out their real estate financing in Swiss francs?

Martin Häusler: It’s not quite that simple. Construction financing in Swiss francs also has disadvantages from the perspective of Austrian borrowers. For example, there are far fewer products available and there are fewer financing solutions. In addition, loans are generally offered almost exclusively with a variable interest rate. This is not the best solution for customers who want long-term interest rate security.

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So what is the best housing finance for cross-border commuters?

Martin Häusler: That’s difficult to answer in general terms, as it depends on many individual factors. For many, it’s a combination of euros and Swiss francs. This is possible without any problems and has the advantage that you get the best of both worlds. On the one hand, the Swiss franc share minimizes the currency risk, on the other hand, euro financing gives you a much larger product selection and greater flexibility, e.g. through long-term fixed interest rates, interest rate bandwidth loans and many additional individual options. However, which products and currency or which mix makes sense varies from case to case.

Do Swiss or Liechtenstein nationals who want to buy or build in Vorarlberg actually get a loan from an Austrian bank?

Martin Häusler: Of course. This is actually very common, because real estate in Vorarlberg is more suitable as a capital investment than in Switzerland or Liechtenstein, where the rental yield is relatively low. Incidentally, Swiss and Liechtenstein residents also predominantly finance their apartments or houses in the Ländle in euros. This is understandable and makes sense because the property is valued in euros and rents are also paid in euros.