An average earner cannot realize his or her own four walls by saving alone; as a rule, a high real estate loan is required. The choice of a home loan needs to be considered carefully, loans of this type typically run for decades, and even slight interest rate differentials cost thousands of dollars. Real estate loans are usually granted against the entry of a land charge. From a legal point of view, the house belongs to the full repayment of the bank.
If there are no repayment installments, the bank can access it and turn the property into money. This is the big risk with real estate loans, life does not go according to plan, unemployment, illness or separation from the partner, can overturn the financing plan and cost the house. When calculating the maximum affordable monthly repayment load, every builder should therefore plan a certain buffer.
Peculiarity of the real estate loan
Real estate loans naturally offer a high credit line, the volume for single-family homes is usually in the lower to mid six-figure range. Most of the time, the loan represents only part of the total real estate financing, the combination with equity, building society contracts or life insurance is the rule. Home loans are often cheaper than ordinary installment loans, the interest advantage is due to the strong credit protection through the entry in the land register.
Use is limited to building or buying property. Real estate loans typically run for 20 or 30 years, in the meantime general building rates can rise or fall significantly. That is why no bank is prepared to offer a constant guaranteed interest rate. Interest-rate fixing periods of ten years are usual, after which the loan interest is renegotiated.
What should you watch out for in real estate loans?
Every borrower is well advised to bring as much equity as possible into his real estate project, after all, he has to pay dearly for every dollar borrowed. The own contribution should at least be sufficient to cover the incidental costs. They make up approximately 10% of the property value and consist, for example, of fees for brokers, notaries and land charges. An extremely low interest rate phase undoubtedly marks the best time to take out a real estate loan.
The low interest rate is to be secured by the longest possible fixed interest period. Interest rate fixation periods of between 5 and 30 years are possible, whereby the banks calculate a risk surcharge on particularly long interest rate guarantees. Here you should not be afraid to use the calculator yourself to determine the cheapest mix of effective interest and fixed interest rates.