How to finance your own property with credit? Read here what information you need for a home loan. You can also use our free and non-binding comparison calculator to get an overview of the current credit market!
What should you watch out for when building a house loan?
House financing must be designed in such a way that the financial requirements for building a house are actually covered. At least as important is the definition of a sustainable load that the builders do not overuse. This is often done by choosing the term, since the longer the term, the lower the rate required for interest and repayments.
Financial performance checks are an important part of the bank’s credit assessment. A secure regular income and orderly economic conditions are essential prerequisites for every loan for building a house.
As with other loans, proper credit information is also required. In the case of construction finance, it may make sense to take out residual debt insurance. The insurance ensures loan repayment in the event of unforeseen life events such as death, illness, disability or unemployment.
What role does equity play in home finance?
An old rule of thumb for building a house is that at least 20 percent of the property should be financed with equity – ie your own assets. Equity does not have to be repaid and has no interest obligations. This reduces the overall financing risk. The more equity capital can be used in building a house, the better.
However, the vast majority of “home builders” cannot do without loans. In the meantime, even 100 percent or more loan financing is offered on the market that does not require any equity. However, lenders must have a good income and secure employment. Such funding is otherwise not available. As a rule, higher interest rates than normal home construction loans also have to be paid.
What Are Mortgage Loans?
Mortgage loans are used in most home finance. These are long-term loans in which the property to be financed serves as security. The hedge takes place via mortgages. A mortgage or mortgage is possible. In practice – contrary to what the term “mortgage loan” suggests – the land charge is mainly used because it is more flexible.
In the case of mortgage loans, a fixed interest rate is usually agreed for a longer period – the fixed interest period. Interest rates of five, ten or fifteen years are common. After the expiry, the interest will be agreed again as part of follow-up financing if the loan has not yet been repaid in full. Mortgage loans are usually repaid in constant regular installments – known as annuities. They contain an interest and a redemption component.
How should building society savings be assessed?
There is still hardly any mortgage lending without home savings. With a home savings contract, capital is initially regularly saved on a home savings account. If the contract is ready for allocation, a home loan can also be drawn on.
Interest rates in the savings phase are often lower than with other forms of savings, but the home loan is particularly cheap. Whether the whole thing is more worthwhile than a pure mortgage loan with no savings can usually only be assessed afterwards.
Since the conditions for building society contracts are fixed right from the start, they enable reliable calculations. As a combination of equity and debt capital, home savings contracts contribute to solid building finance.
Interest and interest rates on the loan for house building
Individual creditworthiness always plays an important role in the interest agreement with the bank. Borrowers have to expect interest surcharges if their creditworthiness is not “first class”. The duration of fixed interest rates also has an impact. As a rule, the following applies: The longer the fixed interest rate, the higher the interest rate. But it also offers more interest rate security. If interest rates are low, longer interest rate fixings are recommended, and if interest rates are high, a shorter interest rate fixation is better.
Interest rates Mortgage rates have been falling steadily since the 1990s. They are currently at an average of one or less than one percent. This is thanks to the low interest rate policy. A home loan was therefore rarely as cheap as it is currently.