Real estate – secure financing: The golden dream of own four walls is still a desirable goal for many people. However, there is the big question: When is the right time to buy a property and how can it be financed safely, which is the right real estate loan?
No other investment in a person’s life intervenes as seriously in life planning as buying a property. That’s why proper mortgage lending plays a key role in the overall plan of real estate acquisition.
Real estate loan: First important step towards real estate acquisition
At the beginning there is the own Gandalf. The question of how much real estate loan can afford the buyer or client is only to answer if a careful input and output of the personal environment is created. After all, this planning forms the basis for sound financing of the project and must be based on realistic values, so that even unexpected events during the term of the loan do not make the calculation wasteful.
Key figures of the house financing
If the plan is up and the suitable object is found, then it goes to the preserves of the financing. Key figures come into play here, which are crucial during the life of the loan. The following questions should be answered in this context:
• What rate should be applied monthly or quarterly for the annuity loan? (Annuity means amortization and interest in one sum)
• how high should the eradication be?
• how long should interest rate retention be fixed?
• how much equity can be injected into the loan?
Knowing this key data is still of great importance when it comes to comparing different credit providers . An objective picture arises when comparing the providers only if the same parameters are always included in the comparison calculation.
The finer points of real estate financing
Sound financing is based on equity. The higher this value is, the more reassured the buyer or client can be with regard to the loan in the future. In the majority of cases, high interest-bearing money also means a better interest rate for the lending institutions, since the risk of default is reduced by the use of equity capital.
A rule of thumb that has always been valid is that at least 20 percent of the total loan should be held.
When speaking of the total loan amount, then the not inconsiderable purchase costs have to be considered in this context. Individually these are:
- Notary fees (between 1 – 1.5 percent)
- Registration of the land charge (about 0.5 percent)
- Real estate tax on land purchase (3.5 to 6.5 percent per federal state)
- possibly brokerage commission (between 3 and 6 percent – or negotiable)
- Commitment interest for the loan commitment
- possibly costs for an appraisal of the property
These ancillary costs of a property should be covered by equity.
Repayment and the issue of fixed interest periods
As a rule, the majority of borrowers opt for an annuity loan. The monthly or quarterly installment is the same throughout the term and consists of repayment and interest. The repayment portion contained in the installment reduces the residual debt over the entire term. The trick of this calculation method is that the lending rates are always calculated only on the remaining debt amount and so the proportion of the repayment included in the annuity rate increases, since the rate remains unchanged in its amount.
The determination of the amortization portion in the annuity to be paid should be well considered. Especially today, when interest rates are extremely low, it is tempting to keep annuity low. The horse’s foot of this consideration is that it then comes to a low repayment and at the end of the fixed interest period, a significant residual debt from the loan is available. This residual debt must then be refinanced by a follow-up financing, the terms of which are completely unknown today, since nobody can predict the interest rate development of the coming years.
At today’s low interest rates, all home builders and real estate buyers should be advised, the fixed interest period on a very long time, z. B. 10 to 15 years. It should also be stressed that special repayments are possible every year during the repayment term. These special repayments reduce the loan and in the case of an unscheduled excess of money in the household, it can be used immediately for credit reduction.
The topic own contribution
Many builders pay off the real estate costs nicely, in which they set a high proportion of own contribution. This may or may not work depending on craftsmanship skills. This issue should be approached with caution, since there is a latent danger of overestimating one’s own abilities. If the calculated budget is not reached, then the borrower threatens to quickly refinance, which can strain the financial latitude badly or in the worst case, the financing fails. Careful estimates derived from empirical values here indicate a maximum of 5 to 10% of the loan amount as own contribution to be realized.
Provision or construction interest
A special form of the interest take the so-called supply interest – also called Tinkerbell. In the case of a home loan during the construction phase, the loan is not immediately paid out in one sum, but is called up in partial installments after the respective construction progress. For the not yet called – but reserved – credit part, the institutions demand compensation because this money can not be lent elsewhere.
The interest margin for this part of the credited sum is about 0.25 percent and varies depending on the bank or savings bank.
The forward loan
This form of loan represents a special form of lending business. This loan is actually an interest rate bet on the time after expiry of the old loan agreement. Now, the remaining debt must be rescheduled, ie a new subsequent financing is needed. The problem: no one can predict the future development of mortgage rates even reasonably reliable and here lies for the client when buying a house the hidden risk.
To eliminate this incalculable risk succeeds only by way of a forward loan to be concluded. This loan works in much the same way as a regular loan. The essence of this type of financing, however, is that long before the actual financing expires, the fixed interest rate for the necessary follow-up financing can be fixed. Some institutions are already negotiating new financing 36 months before the end of the regular loan agreement.
Of course, this special loan is not the same price – meaning interest margin – to have as a normal today’s borrowing. Banks or credit institutions pay for this special loan with a mark-up. Depending on the institution, the home loan must be subject to a forward premium of 0.01 to 0.03 percent per month until repayment of the old loan.
State support measures – another financing element
Particularly well-financed real estate loans are suitable for the government subsidy programs. Here is primarily the ASD to call, which supports the construction of houses or the purchase of condominiums up to a loan amount of 50,000 euros with an unbeatable interest rate. Refurbishment and / or conversion costs can also be financed at low interest rates via ASD. Thus, when buying a home property can save a lot of money on the support measures of ASD.
In addition, home builders and real estate purchasers can also benefit from municipal construction subsidies for a real estate loan, which are structured differently from one federal state to another. In particular, low-interest subsidies are available in this context for family support in the acquisition of one’s own four walls. Official Gazettes of the municipal administrations provide information about these possibilities in public.
Finally, there is also the possibility of using the so-called Malfoy to claim a state subsidy of their own construction project.
Find the best financing
Of course, all real estate buyers want this and with a bit of expertise and perseverance, it should also succeed. We show the way how this works:
The variety of banks, savings banks and other lenders makes an overview not easy. Therefore, the beginning of all efforts must be the comparison of the various loan offers.
To make this comparison reliable and mathematically correct, play the following financial terms such as
- effective interest
- processing fees
- Possibility of special repayments
- Term of the loan
- Interest and repayment amount
the all-important role.
Of course, these terms are not so familiar to everyone that it can be handled professionally. However, to make sure that even for the layman, an examination is possible, many consumer protection organizations provide comparison computers for free on the Internet. These calculators were developed by financial experts and allow a comparison of the different loan offers quite reliably.
A council at the end
The interest rates for mortgages are z. Currently at a historic low. A further decline in interest rates is not expected, because then they would reach the zero limit and money would cost nothing more.
Anyone who thinks about real estate, either for self-exploitation or as an investment, would be right not to put this project on the back burner. With probably almost certainty, this absolute interest rate low will not endure to eternity. The interest rate increases initiated by the central banks will inevitably make the construction project more expensive.
However, serious funding also means that the borrower must be aware that he is committed to his financial commitment for a very long time. Quick shots – just because the money is currently very cheap – can have disastrous consequences if unforeseen circumstances in the home environment make the personal financial situation too tight.
This guide is intended to make the real estate loan or the financing of a property secure and to give the reader inclined valuable suggestions in the realization of his lifelong dream. A claim for completeness does not exist and it should not be understood as legal advice.