A comparison of different lenders, for example using Construction financing calculator, is essential. Ultimately, moving into your own home should also provide security in the long term. Conditions such as interest rate or repayment over the term are just a few elements of building financing that must be planned and calculated precisely.
What is construction financing?
The term construction financing or construction loan refers to the provision of a certain amount of money by a bank. Construction financing is used to build a property including the acquisition of the land required for this. However, construction financing does not only consist of mortgages, but also of equity. For this reason, construction financing is also called mixed financing designated. Own funds primarily include savings on building savings contracts as well as construction work carried out by oneself or previous ownership of one’s own property.
Which bank is the best for real estate financing?
The construction financing offers from banks can vary significantly. Most people interested in building get their first information about a real estate loan from their bank or savings bank. However, in many cases it is worth taking a look at other banks. If you would like to get an overview of the various mortgage loans and the mortgage interest rates, a loan calculator can also help you in this case. After entering all the necessary data, you will receive building financing offers tailored to you and your details by email for comparison purposes.
What is the current interest rate for construction financing?
The current best interest rate for building financing is an average of 3.5 percent, but differs in some cases. Although building interest rates have risen compared to recent years, they are still at a relatively low level.
Predictions are difficult to make. It is unclear whether interest rates will continue to rise or fall. In any case, you should now consider whether there will be any changes in the next few years that could affect your financial situation.
Not only the choice of lender influences the interest rate, but also the loan term and the equity provided. For a better overview of your possible building financing, including current interest rates, use a building financing calculator. Here you can calculate your building financing, determine amounts and refine interest rates.
Types of interest: debit interest and effective interest rate
The interest rates depend on the one hand on the lending banks and on the other hand on the agreed conditions. Both play here Duration as well as that Amount of the loan and those provided Personal contributions, whether financially or through work performance, plays a role. It will also help you determine the interest that will actually be incurred Construction financing calculator.
The interest for building financing is made up of different types of interest.
- Sollzins: The borrowing rate is the base interest rate that a bank charges when granting a loan.
- Effective interest rate or effective annual interest rate: This determines how high the actual total financial outlay for the loan will be – namely including other costs such as processing fees, account management fees and commitment interest.
Repayment and special repayment
The repayment is also calculated based on the effective annual interest rate. The repayment describes the repayment of the pure loan in installments. In addition, the interest must also be paid back.
Over the course of the construction financing, which usually runs for a period of 20 to 25 years, you initially pay a large part of the interest before you pay off the actual loan and thus the debt on your home. Different repayment rates determine the term and are adjusted to the value of the property and the loan taken out on it as well as your income. In addition, you usually have the option of so-called Special repaymentwhere you can pay a larger sum in a one-off payment, regardless of the monthly agreed loan installments.
Also think about additional costs such as property transfer tax, notary fees and, if applicable, broker commission.
Who gets a construction loan?
In order to take out building financing, certain requirements must be met, which the bank checks carefully in advance. This not only serves the security of your bank, but also your own. Ultimately, the dream of owning your own home should remain financeable in the long term and not put you in a financial slump. The following requirements should be met:
- Age of majority: In principle, the borrower must first be of legal age and have a registered residence in Germany.
- Good credit: You also need good credit, which primarily means solvency and no negative entries in Schufa.
- A regular income is required.
- Equity: Existing equity is also an advantage. In order to finance a building without equity, your creditworthiness must be extremely good, for example in the form of a very high income that is expected to be permanent.
How high should the income be?
The level of income is less important for whether you get a building loan. Rather, the amount of the loan depends on your income. Your pure net income determines how much of the property you can finance permanently. The rule of thumb is that the monthly installments of the building loan no more than 40 percent of your net income should amount to. You calculate your discretionary income by subtracting all fixed costs from your net salary. You can now use a mortgage calculator to create the right offers for you, including the various interest rates, based on your free net income.
How long does it take until construction financing is secured?
A binding financing commitment takes an average of two weeks. This is because after applying for the building loan, the bank has to look at all the required and submitted documents and draw up an appropriate financing plan. It will also take several days or even weeks until the loan is finally paid out. Depending on the type and amount of the loan, the entire process from application to approval to disbursement of the building loan takes on average two to three months, but in some cases it is a little quicker. In many cases, however, it takes a little longer.
In order to save waiting time in advance, have your creditworthiness checked, put together the documents about your equity and have the value of the desired property determined.
Can I get a real estate loan without equity?
As already briefly mentioned, financing without equity is rather atypical. The possibility still exists, namely when a so-called Full financing is requested. If you have excellent creditworthiness, i.e. a very good monthly income and impeccable Schufa, this is possible at many banks. However, the amount of the loan required is also crucial. However, the price for full financing is often significantly higher interest rates, which result, among other things, from the higher loan amount.
When is a loan rejected?
In some cases, loan applications are also rejected. The most common reason for a rejection is negative entries in Schufa, i.e. the protection association for general credit protection. The Schufa score provides information about the extent to which an applicant is creditworthy. Negative entries such as previous loans or outstanding debts reduce the score and the chances of getting a building loan decrease. However, it is worth comparing several banks. A monthly income that is too low and a fixed-term employment contract can also lead to the rejection of the loan application. Ultimately, too high a credit requirement can also result in rejection.
2024-02-28 13:36:15
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