Higher equity improves the interest rates of the home purchase loan and shows the bank that the borrower can plan reliably. With the proactive savings before buying a home, you can not only secure a cheap loan. “The first thing you need to know is that a home loan is a loan that is cheaper in terms of interest than, for example, a car loan. The reason for this is that the lending bank has a lower risk. In other words, the condition that customers should bargain the hardest, as the rate is calculated every month. Margin real estate credit comparison infographics Equally large differences in the margin.
Buying a home or apartment: How to buy a home
What securities do you need for a loan? None of it: The most costly is what almost every buyer of a house borrows from a house bank, a housing company, or an insurance company. And who receives a loan of 200,000 USD to 5 percentage points and in constant monthly installments of 1000 USD pays, is not going on in the end 200,000 USD, but has more than two times – a good 440,000, of which 240,000 USD pays.
In doing so, we explain the pitfalls and pitfalls of mortgage lending and provide you with valuable tips for advising banks. From apartment hunting to relocation management, this guide will help. What is the bank and building society financing suitable for? Who does not take much money, does not win or inherits the lottery, can simply answer: Yes.
The high interest rate is the one who receives a huge amount of credit when building a house or buying a home. The investors – ultimately savers who have brought their capital to the bank – want to protect themselves against inflation risks and a possible bankruptcy of the debtor with interest and reward that they have not used up their capital for years and decades.
But for you as a borrower, the situation is not as bad as it sounds. Even if you pay the same amount every day to the banks, it is getting smaller and smaller. Firstly, inflation reduces the debt weight – one of its few advantages. On the other hand, in conventional financing, an ever smaller part of the money is spent on interest, but an ever higher part of the repayment, which is profitable for you. You save interest – and what you have less in financial assets, you also have less debt – so more in net real estate assets.
For lending, credit institutions need a certain amount of own funds. It usually has to make up 20 per cent of the total effort. So if you have 40,000 USD at the top, the family house can be 200,000 USD – no, it may amount to a maximum of 190,000 USD. Because the purchase price is at least five per cent of the acquisition costs.
Ultimately, it does not matter to the banks how the debtor’s equity is made up. For the financial institution applies: The credit volume is significantly lower than the market value of the projected object. Only then can the bank expect it to recover the borrowed capital in the event of a forced sale. Where can I find the right loan?
The core of virtually every real estate loan is the real estate loan of a house bank – even if you do not receive the capital directly from it, but through a loan broker. The interest rate is fixed for a certain period, eg for five, ten or fifteen years (fixed interest rate). These consist of the interest due at the beginning and a repayment contribution, which is also determined at the beginning.
For example, a loan of USD 100,000. An interest rate of five percentage points means USD 5,000 per year. The fixed repayment of, as a rule, a percentage of the original loan amounts to 1,000 USD. Every year 6000 USD go to the house bank – and thus 500 USD per year.
Such a loan is considered as an annuity loan (“annuities” means “equal installments”). The repayment gradually reduces your debt – including the interest you spend. Thus, the repayment over the years faster and faster. After expiry of the fixed interest period, the loan is usually extended.
They can be smaller, but also much larger than the previous ones – and with it the monthly installments. What is the calculation of the monthly credit? The second limiting point for your loan is the monthly installment.
Those who have over 1000 USD per month can apply for an interest of between five and 200%. Thousand USD from the house bank. Ultimately, the lower of the two limits, which is calculated from your own funds and the maximum substrates that are affordable for you, is what determines the highest possible real estate price.
What can be done to reduce interest rates?
Finally, you show the trusted house bank the cheapest provider. Apply for loans from financial intermediaries and discount banks that are easy to obtain on the web. Take a look at the conditions of the benches. For example, you get better interest if your loan is only 60% of the value of the property instead of 80%.
The situation is similar when the amount of credit rises – often, for example, loans starting at USD 100,000 will be slightly cheaper. Of course, they have little short-term impact on loan size and capital. In some cases, however, an upper limit is exceeded, from which the interest rates are lower. Agree on a larger initial repayment than the normal 1% of the loan.
Some banks grant a small interest rebate for “quick repayments”. agree with the house bank on a relatively short fixed interest rate for the credit volume, eg five instead of ten years. This is the first way to save the most capital: a $ 150,000 five-year loan can cost more than $ 100 per calendar month less than a fifteen-year loan.
If you sell the property prematurely, you will generally get better out of the loan than with a longer lease. If you in between z. For example, through inheritance or an increased salary, you can repay part of your receivables and you can save more interest after five years.
Ironically, interest rates are still low today. Most experts, however, expect inflation in the coming years. Should this forecast occur, interest rates will rise as well. However, those who secure the good conditions of today over a longer period of time, is the King among the financiers.
On the other hand, you can not pay more than 500 USD per calendar month at short-term fixed interest rates after five years. When comparing loan offers, you should never look at the nominal interest rate (interest that you have to pay for your loan transaction per year), but always the effective interest rate (which also includes bank processing and brokerage fees); this reflects the funds more realistic.
These include, for example, estimation costs, commission costs if you do not call the loan immediately, or surcharges for the payment of partial amounts. Always try to make the loan as low as possible to save costly interest rates. If the financial room for maneuver is large enough, it is better to vote with the house bank two instead of one initial repayment of one percentage point per year – and if possible three.
This is a truism, but many home buyers do not consider it: the lowest interest payments are always made by the one who has the lowest liabilities. And how do you negotiate wisely with the house bank? Before negotiating a loan with the house bank you should prepare yourself well. Compare the terms and conditions of multiple banks and look for additional costs, such as determining the mortgage lending value – this is the amount of your property on which the house bank depends on the maximum amount of your loan.
It is more likely that the house bank helps you with additional costs than with the demand for low rates. You can also often negotiate the right to special repayment if the house bank does not negotiate it anyway. Also, look for a provision in the Loan Agreement that allows the house bank to sell its loan claim to another person only if you agree.
In this way, you exclude what has happened to many debtors in the past few years: All of a sudden your creditor was no longer the familiar house bank, but a financial grasshopper. Important note: Do not ask the house bank as a shy beggar for cash, but as an equivalent partner.
Not everyone gets the top conditions, only the ideal customer who meets all requirements: The interest rates have increased for most consumers. However, they are often still below the bank average. Discount loan brokers receive funds from all banks across the country. They also relieve the banks of much effort and time.
Special requests are not respected, small loans are often not awarded. Specialized sausages are not popular, such as the possibility of an unscheduled repayment, a loan period of less than five or more than fifteen years. Some middlemen completely reject such additions, others demand a premium on the interest. It must be able to estimate the asset, calculate the potential loan amount from its salary and living expenses, and settle it with the burden calculated from the amount of the loan and the interest.
Various online providers offer small utilities that can be used to calculate the different amounts. In such a case, it can be the most expensive form of financing – even if the interest is lower than a bank loan. The basic idea of saving is that many are first paid into the fund.
Whoever pays the most or the fastest, gets the first loan – and also the money saved back. Now they pay back their credit one after the other, and the next gets one. The deposit will be refunded, the home savings. Prerequisite for a loan is always that the debtor has a minimum balance.
In most cases this amounts to 40 to 50% of the contract amount. The order in which the loans are received by the customers depends on the corresponding “valuation number”. Sometimes the credit flows in, sometimes the interest collected so far. For some contracts, however, it is possible to increase the volume of credit. However, this is bought with increased interest rates and repayment installments.
When paying out the loan, some funds add a fee a second time – the loan fee is usually two to three percentage points. You then pay off the loaned amount plus interest. Interest rates are often lower than the house bank, but your monthly interest rate is usually larger.
Lower interest rates, but more? That’s because the housing associations demand a lot from their borrowers every month. Because their area of interest differs from that of the bank. They are happy with a sluggish repayment and a prolonged term – they receive interest income. In contrast, the housing companies want the borrowed capital back as quickly as possible so that they can make it available to their future customers.
The borrower receives a high monthly amount. But if you can lift them, you have an advantage: you pay much sooner than at the house bank.