No more rent to pay, an investment for your own children leave behind or create your own safe retirement – more than half of Germans dream of home. The way there leads either through the purchase of an existing property or the new building. In both cases, the bank is an important partner in financing.
At the beginning is the budget planning
If the decision has been made in favor of a home, at the very beginning there is the question of what one can even afford. The answer to this is closely linked to the monthly budget, because it depends on how much funding can be spent in 20 or 30 years time.
Decisive questions in budget planning are:
- Which costs are regularly incurred for the standard of living?
- Are there any other loans that need to be paid monthly?
- What expenses are incurred for leisure activities?
- Which revenues are compared to the monthly costs?
- What career changes can arise and how is it about family planning?
- What would be the monthly additional costs and building insurance for a new building or an existing property?
- What is the reserve for repairs?
After deducting all running costs, a net sum remains, which can be spent monthly as a repayment installment for a new building. However, the extrapolation over the credit period does not give the net amount for building a house.
The purchase price is not everything
The pure purchase price is just one aspect of the cost. A big item is also the additional costs – both the classic and notary, land register entry, land transfer tax and brokers, which already make up to 15 percent of the purchase price, as well as less obvious costs:
- For existing real estate costs for an appraiser. A specialist can make a valuable contribution to examining the building fabric for defects. This will save you a lot of trouble and repair costs later on in case of doubt. The cost for an expert is between 50 and 200 USD per hour.
- With a move to the home is often the desire for something new. In addition, the own four walls usually offer more space. The result: The purchase of new furniture is on the plan, perhaps in the existing property new parquet be laid or the bathroom gets new fixtures and Co. The purchase of new parts of the interior costs money, which should be planned.
- In addition to the interior furnishings, the necessary expenditures for renovation and renovation go into existing real estate. Their height depends largely on the size of the property and the age of the property, but it can come together a considerable sum.
- Banks may charge interest for the time a loan is granted and made available to the borrower but not yet used. These deployment rates are also scheduled and fall in particular for new buildings according to the construction progress. Some institutes offer a non-provisioning time here.
Architect or builder?
Especially in a new building, the question arises about the planning implementation. The client can choose between the classic architect and a developer who does not necessarily have to differ in costs. A comparison is worthwhile.
The decision for one or the other offers specific advantages and disadvantages.
|Advantages of planning by architects||Disadvantages of planning by architects|
|· The individual wishes of the client can be implemented.
· The architect leads the construction and takes over the coordination of the individual trades.
· Offer preparation and comparison as well as the control of the implementation of the agreed services are in the hands of the architect.
|· The liability lies with the client, the architect is initially liable only for the planning.
· A single contract is concluded with each trade.
· The architect’s fee accounts for about 10% of the construction costs. If the construction becomes more expensive at the end, the fee (fee HOAI) usually rises.
|Advantages of planning by developers||Disadvantages of planning by developers|
|· The development of the property has already taken place or will be taken over by the property developer.
· A standard construction reduces the construction costs.
· The property developer is the sole contact person of the future buyer and at the same time assumes the liability for the trades.
· Payment is made in installments only for services provided.
|· The standard construction leaves little room for individual wishes.
· In the case of construction defects, the way goes through the developer, because the buyer is not the builder.
In terms of lending, the amount of available equity usually also plays a role. This reduces the cost of the real estate loan, the loan amount goes down and the accrued interest rates too.
For equity: 20 percent is the minimum. It is better, however, to be able to meet 30 or 40 percent of the financing amount from their own resources. In addition to cash balances and savings accounts, these include cash deposits on overnight and term money accounts, shares and funds as well as home loan and rental income from other real estate.
It is especially important not to put all the available equity capital into the financing, but to retain a part of the financial resources in order to be able to counteract financial bottlenecks and cost increases.
The right loan for house financing
It is only clear that you need outside capital for the home purchase. But the real estate loan offers numerous options with regard to payout and repayment. So it makes sense, even before the appointment with the bank consultant to be clear about how the credit agreement should be designed.
The annuity loan is the classic loan for real estate financing. Here, the monthly rate remains the same over the agreed period of fixed interest, whereby the interest and the repayment installments change within this sum.
A disadvantage of this form of loan: If the general interest rates in the lending fall, the borrower does not profit from it, but remains bound to the agreements.
In the case of an early repayment of the loan amount, an early repayment penalty usually accrues, with which the bank demands compensation for the lost interest payments. Under certain circumstances, however, this may be waived ten years after full payment of the loan amount in accordance with § 489 BGB.
After the end of the fixed interest period – usually a period of ten to fifteen years – the borrower can either arrange a follow-on financing with the bank or replace the loan and change the bank. It’s worth it if there are more favorable terms with another bank.
Fully amortizing loan
The repayment loan is a special form of annuity loan, in which the principal has repaid the entire loan amount at the end of the term. Advantages arise here accordingly from the planability by the fixed duration and monthly load.
The disadvantage: Firstly, the right to special repayments and repayment pauses in this form is usually eliminated. On the other hand, the duration is drastically reduced, so that the monthly installments are higher than with the classic annuity loan. Thus, the repayment loan is only suitable for people with a high and secure income.
The variable loan does not fix a fixed interest rate. Instead, interest rates are adjusted every three months. For the client, this offers the advantage that termination can take place at any time, without a prepayment penalty being incurred.
If interest rates are particularly favorable, the loan can be converted into a classic annuity loan. Conversely, however, there is also the risk that the monthly installment will increase with rising interest rates – but this can be capped by the special form of the cap loan, where an upper limit prevents interest rates from increasing immeasurably.
The loan is therefore less suitable for long-term mortgage lending, but is suitable for short-term financing.
State subsidies allow builders to receive subsidies from the state, thereby reducing their own construction costs. This can be done in different ways:
- Intrasavings bank subsidy programs : The Intrasavings bank supports builders with subsidized construction loans in the form of interest subsidies and repayment subsidies. Grants are also available for modernization that contributes to improving the energy balance. The application for the funds and the credit processing takes place exclusively via a bank.
- Housing – Halsteri : Through a so-called Halsteri loan or a combination of Bauspar contract and loans, the state helps builders to pay off loans faster with the help of allowances and tax relief. The application for the use of the money is made via the Central Admission Office for Old Age Assets.
- Countries and municipalities often help builders with cheap building credits and building plots. For this one must be already resident in the appropriate federal state. The amount of the grants is re-awarded each year, so that the time of the application determines the success – “first come, first serve” principle.
Financing without equity
Partly popular is the full financing, without own capital is available. For the bank, this means increased risk, so interest rates are generally higher than for equity. As a result, the longer maturities and higher monthly burdens are disadvantages of full financing. At the same time, one’s own financial risk increases.
Due to the risk of the bank, not every bank offers the possibility of full financing. But even then, there is an intensive review of the creditworthiness of potential borrowers. In any case, this is just as essential as a high regular income