More and more people want to fulfill their dream of owning their own house and make provisions for old age. But since the demand is particularly high in the metropolitan areas, the financing of the home should be planned with great care. In today’s article, we go into the most important aspects of mortgage lending and reveal which pitfalls should be considered.
Construction interest cheaper than ever – this is to be considered when financing
Those interested in real estate are currently benefiting from very low interest rates, so it is worthwhile to start planning real estate financing at an early stage. How exactly this planning should look like can be read in the following sections.
Adjusted loan amount
When it comes to financing, for many buyers only the value of the property is initially relevant. However, not only the purchase price but also the costs for the appraiser, the broker and the notary play an important role. It is therefore particularly important to know your own financial possibilities and to plan a sufficient buffer in advance. If the equity in a Credit is manageable, high interest surcharges drive costs up considerably. Financing proves to be particularly promising when the equity makes up ten to twenty percent. The loan amount should therefore cover all items so that no refinancing is necessary.
Our tip: If you don’t want to take over financially, you should compare the costs for the financing with your own income in advance.
Adjusted repayment
While a low minimum amortization may seem tempting at first, there are risks associated with it. With a low minimum repayment, the monthly payments are manageable – but this also often drives up the loan amount. With a minimum repayment of two to three percent, however, the full repayment of the loan is within reach. In addition, the interest rate level is also subject to long-term fluctuations, so that the debt burden can increase significantly with mini repayment installments. Therefore, if you want to be well positioned when it comes to final financing, you should adapt the repayment to your own possibilities.
Fixed interest rates for a longer period of time
Builders are currently benefiting from low building interest rates, which benefit real estate financing. In order to ensure long-term planning security in this regard, a 10 to 15-year fixed interest rate should be claimed. Since contracts with a long fixed interest rate according to Section 489 of the Civil Code can be canceled even 10.5 years after the entire loan amount has been paid out, builders benefit from additional flexibility at this point. Accordingly, the current interest rate level with sufficient fixed interest rates pays off in the long term for future homeowners.
Costs for an appraiser
Since the banks also want to protect themselves in the event of a loan, the mortgage lending value of the property is usually estimated by an appraiser. The costs for this report range between 0.2 to one percent of the loan amount and are borne by the borrower. So if you want to save yourself a later refinancing, you should plan the costs for the appraiser, for the development of the building site and other items in advance. If a detailed budget is drawn up, the chances are good that the loan will cover all construction costs.
Pay attention to the commitment interest
Often, a loan is called up in several stages, which depend on the progress of construction. Since there can usually be several months between these individual stages, so-called commitment interest is due on the part of the banks. The commitment interest is calculated separately from the normal interest and is almost always 0.25 percent per month.
Keep an eye out for credit comparisons
If you want to find the right home loan for you, you should first compare the offers of the individual credit institutions in detail. Therefore, it is advisable to check the amount of the Interest rate to examine closely. Interested parties can find suitable mortgage calculators, including providers and conditions, on the Internet. If the right lender has been found, a tailor-made offer can be obtained. For this, the bank usually needs a copy of your ID, as well as evidence of the income and the property.
Flexible loans can be worthwhile
When financing a property, unforeseen events should always be taken into account. With a flexible loan, the monthly installments and the fixed interest rate can be renegotiated if necessary. Special payments and special repayments are also included in flexible loans, so that the loan can be paid off earlier in case of doubt. A flexible loan also offers borrowers the necessary leeway in the event of possible changes in income. Therefore, if you want to protect yourself against doubts, you should also attach importance to sufficient flexibility when choosing the loan.
Check funding
Builders should check in advance whether and which funding opportunities exist for building finance. For example, KfW-Bank sometimes has grants for repayment as well as loans on attractive terms. Families with children and builders with energy-efficient properties in particular benefit from the discounts offered by KfW Bank. However, the requirements for funding may vary, so those interested should first contact the consumer advice center for information.
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