Unlike savings accounts, the interest rate on building savings must remain unchanged for at least six years. However, building savings today are becoming more attractive than before, but for a different group of customers. It offers cheap loans, which can save us up to 200,000 crowns for every million of the target amount.
The reasons for entering into a building savings agreement are changing
Until recently, the main reason for concluding a building savings agreement was state support. Thanks to it, construction companies offered significantly better deposit appreciation than savings accounts. Today the situation is changing. Even with the proper settings, you can get an appreciation on construction savings that is not significantly higher than on a savings account. The advantage is the setting of the interest rate for a period of at least six years, which is a guarantee that a savings account does not have.
The downside is the limited ability to manage money in a construction savings account, while with savings accounts the transfer of funds is a matter of time. However, building savings offers something not found in other banking products. Yes, they are building savings loans with a low and fixed interest rate.
A housing savings loan is not a bridging loan
Most of us think of “lending” and “building a credit union”. transitional loan. The construction company can take action immediately and without waiting. On the other hand, its parameters are a normal bank loan with the same interest rate as all other loans. As interest rates in the market rise, interest rates on transitional loans also increase and therefore their availability also decreases.
However, in addition to interim loans, real estate companies also provide building savings loans. Their main advantage is the interest rate. This must already be specified in the real estate savings agreement and, by law, cannot exceed the deposit interest rate by more than three percentage points.
What does it mean? The lower the rate at which the construction company pays interest on our deposits, the cheaper the loan must be. By entering into a building savings agreement, we can guarantee a loan with a rate of 2.99% to 6% per annum. Interest rates on building savings loans therefore end where the rates of other banks have just started.
The interest rate is guaranteed, it is not a “rate from”
By indicating the interest rate of the loan directly in the real estate savings contract, its immutability is ensured. In banks’ rate tables it is customary to indicate “prime rates”, ie the lowest interest rates for the best customers, sometimes obtainable only when taking out insurance or another financial product in addition. This is not possible in the case of building savings loans. The interest rate is part of the real estate savings agreement and its amount is limited by law.
Construction companies are naturally more willing to provide bridging loans with higher rates, but they cannot completely refuse to grant a loan from the building’s savings, because they are contractually bound to this offer. According to data from the CNB, the volume of housing savings loans is growing this year and their average interest rate is less than four percent.
Nothing is free, you need to save first
To obtain a building savings loan, we must meet the conditions set out in the contract. It means saving for at least two years, saving a certain amount and, in some tariffs, even reaching the prescribed evaluation number. The savings period required to meet these conditions varies from two to six to seven years. Much depends on the selected building savings plan and the intensity of the savings. Especially for rates that use an evaluation number, good knowledge is required to set up the contract correctly.
At the same time, paradoxically, it doesn’t have to be that a more favorable loan means a longer savings period. In the offers of the construction companies we can find both rates with cheap and easily accessible loans from the construction companies, as well as opposite offers.
Those who have been saving for a long time have an advantage
We only have construction savings for situations like today. That is, when home loan interest rates hit four percent or more. The period of extremely affordable mortgages has lasted so long that we have become accustomed to and consider rates above three percent. But this is a mistake. In the past we will not find a period in which the mortgages were at two percent.
So it’s no wonder we’re struggling today to cope with the current level of interest rates. And that few people expected to use a housing savings loan. Anyone who is not in a hurry to build or repair a house or apartment has time to plan everything. But what about us who don’t want to or can’t wait? They may be able to use the building savings agreement they already have at home.
The building savings banks currently have 3.2 million building savings contracts. This is almost a third of the population. It is therefore possible that you have a housing savings agreement at home. And it is almost certain that it will guarantee you a loan with a lower rate than what any bank will offer you today.
Of course, we can encounter various difficulties, for example in the form of too low a target amount. But it’s not an insurmountable problem either. Construction companies usually allow us to change the target amount according to our needs. But the most important thing: for previously concluded contracts, at least part of the loan waiting period has already elapsed, for older contracts we can get a loan immediately.
Is it worth it?
We can take out a building savings agreement with the aim of using a low-cost loan as insurance for the future. We can, but shouldn’t, use a housing savings loan. Let’s say we plan to make a loan at a 3.5% rate over three years. If interest rates drop by then, nothing prevents us from taking advantage of the situation and taking out a loan from another bank that will offer us better conditions. If, on the other hand, interest rates do not go down, or even go up, we have a certain loan with a known rate in advance that we can repay. Plus with a rate that won’t change.
It should be borne in mind that in the savings phase we will collect lower interest from the construction company than from other banks. While today we can earn 5 percent annually on a savings account, a construction company’s interest rate will be significantly lower. If we want a cheap loan, it will be better to settle for an interest rate on deposits of up to one percent. The lower the deposit interest rate, the cheaper the next loan will be.
A calculation was published on the specialized website stavebky.cz, according to which today we can save up to 200 thousand crowns for every million of the target amount. And this also taking into account the losses deriving from the low interest rate on deposits in the savings phase. A low-cost housing savings loan can bring us many times more savings than we can get from interest on deposits and government support.
