You have found your dream property? Now it's time for the "nitty gritty". In this article, we explain what you must pay attention to before you apply for a loan.
Compare offers & the bank interview
The days of going to your local bank and being grateful that they approve your financing request are thankfully over. The price differences of the individual banks are sometimes immense. Construction financing is still an important source of income for banks and you are a desirable customer.
Appear appropriately confident in the negotiations, for this we have some tips for you:
- Do not fall into the role of a supplicant: you are a desirable customer.
- Negotiate with the bank on an equal footing: after all, you are paying for your loan with the agreed interest rates.
- Be self-confident, but not arrogant.
- Active listening ensures a good atmosphere in the conversation.
- Briefly summarize your key points.
- Important: bring all important documents with you to the bank meeting.
Tip: use our comparison tables. We help you without obligation and thanks to the internet daily updated to find the best offers for your financing project with one click.
Possible special repayments
A loan with unscheduled repayment is the right choice in many cases. But make sure that it makes sense in your particular case.
What is a special repayment?
Normally you pay off your loan in monthly installments; this is contractually agreed in the case of your real estate loan. All additional repayments you make are called unscheduled repayments.
The special repayment right
You should have already agreed on appropriate special repayments with the bank when you signed the contract. Adjusting a loan agreement afterwards to the possibility of an unscheduled repayment is usually difficult. If you are already in the near future with further capital z.B. Can count on an inheritance, salary increases or bonus payments, a real estate loan with unscheduled repayment rights is recommended.
But beware: not every bank offers a special repayment right. This is because the banks earn money with your contractually fixed monthly installments. The sooner you repay your loan amount, the less the bank earns!
Unscheduled repayment and the construction interest rate
If you agree with the bank on a special repayment right, this often has an effect on your construction interest rate. As already mentioned above, banks earn with your loan. The faster you repay the loan, the less profit the bank has. Thus often results: the more special repayment rights, the higher your construction interest rate. Always weigh how much unscheduled repayment you need and calculate the whole thing accurately.
Unscheduled repayments are a fine thing, as they can significantly shorten the term of your construction financing. However, you should think through your options realistically before completing your studies. Are 10% unscheduled repayments per year really necessary? How often you will be able to use? Lower unscheduled repayment rights often lower the interest rate on the loan.
The agreed repayment rate
The amount of the selected repayment rate influences the speed of loan repayment. Many banks grant therefore with a faster credit repayment a lower building interest, since also the credit risk is reduced faster.
Tip: what is important for you is the so-called annuity, i.E. The amount you have to pay each month. The low interest rates currently make it possible to stay within the monthly budget despite a higher repayment rate – take advantage of it!
With a planned construction financing, you should always weigh both against each other:
A monthly installment that you can pay even if your financial situation should deteriorate over time and a reasonable repayment, so that you can also repay your construction loan in the desired time.
Please remember: a top construction interest rate is of no use to you if you have hardly repaid anything after 10 years. Especially if you need to reschedule after this time and you enter a high-interest phase.
The fixed interest period
Under normal circumstances, the rule is: the longer you let the interest rate be fixed, the higher the interest rate will be. Of course, this is also due to the current low-interest phase in particular.
Thus, the fixed interest rate period has a very significant impact on the amount of the construction rate for you. However, the current low interest rate level also offers the best conditions for construction financing.
Tip: take advantage of the currently particularly low interest rates for a long fixed-interest period. A long fixed-interest period gives you planning security and reduces the risk of running into a high-interest phase with the remaining debt when the fixed-interest period expires.
Often 5 or 10 year fixed interest rates are offered. But there are also banks that offer 15, 20 or even up to 30 years fixed interest rates.
After 10 years, you have the right to terminate the loan anyway, without the bank being entitled to an early repayment penalty. So if the interest rate level has fallen after 10 years, you as a borrower can even refinance into a more favorable follow-up financing.
The location of the property
The amount of the construction interest for a loan depends not only on your personal circumstances. Before a bank gives a loan, it checks how valuable your future property is in the first place. Here we speak of the mortgage lending value of a property.
In addition to the condition of the property, its location also flows directly into the mortgage lending value of a property. The lower the loan-to-value ratio, the lower the loan-to-value ratio will be. Banks often grant loans in unfavorable locations, i.E. With a poor loan-to-value ratio, even only against interest surcharges.
Often supposed bargains develop later as not a very good investment.
But also for you and your future home, it is always important to look closely at the location and the associated development potential. Not only for financial reasons, but also for personal reasons.
When buying a property, make sure to inform yourself about the location and the region in advance. Consider also the future value development with your purchase. Are real estate in demand in this location? Will the demand increase in the future?
The loan-to-value ratio
With every construction financing, the bank determines the so-called loan-to-value ratio in advance. This is calculated from the ratio of the required loan amount to the calculated mortgage lending value of the property to be financed. The mortgage lending value indicates the amount of the loan with which the property can be lent (how much is the property actually worth, several factors play a role here).
The loan-to-value ratio, on the other hand, is the percentage that reflects the relationship between your loan, the prior encumbrances, and the loan-to-value of your property. The loan-to-value ratio can thus be expressed in a formula. Here's a quick example:
The mortgage lending value of your property is 360.00 euro. For the financing of the property you need from the bank 160.000 euro . In addition, you have a KFW loan in the amount of 45.000 euro. On your real estate are still pre-loads of 10.000 euros (third-party loans that are still open). The formula for calculating the loan-to-value ratio is structured as follows:
Loan-to-value ratio = (loan total from the bank + other loans + existing prior encumbrances)/loan-to-value;
loan-to-value ratio = (160.000€ + 45.000€ + 10.000€) / 360.000€;
This formula results in a loan-to-value ratio of ~0.6, i.E. ~60%. This means that you lend 60% of the property through borrowed funds.
Tip: the most favorable interest rate conditions are obtained with a loan-to-value ratio of up to 60 percent.
The loan-to-value ratio always has a direct effect on the loan interest rate. As a rule of thumb: the lower the loan-to-value ratio is, the lower is also the construction financing interest rate.
The loan-to-value ratio can of course be reduced by using equity capital. It can often be worthwhile to bring in a little more equity to get a slightly lower loan-to-value ratio, as this in turn can mean a significantly lower interest rate.
Tip: in addition to equity, this effect can z.B. Also be achieved through the use of substitute collateral – z.B. Another debt-free property, or savings that are assigned.
Your credit rating
Your credit rating is for the bank a statement about your creditworthiness and allows in theory a classification of your ability to repay loans taken also tatschlich again. Before banks grant a loan, a credit check is carried out on the basis of your data. It is often not only a question of whether you get a loan at all, but also at what interest rate.
Usually flow into the examination banks thereby criteria to
- Of your person, such as z.B. Marital status, profession/employer, etc.
- Of your credit experience, z.B. By schufa information or statements of your current account, existing loan agreements, etc., are taken into account.
- Your liquidity, that is, your income-expense situation, existing assets or liabilities and, of course, existing equity capital, which is brought into the financing a.
A very important criterion is of course your ability to pay – that is, whether you can actually afford the monthly installment. The amount of income is checked as well as the long-term nature of your income.
In the case of employees, this is relatively simple, namely through the last pay slips. In the case of self-employed persons, such a check is much more extensive, so that the creditworthiness can be assessed by the bank.
Important: in your income/expenditure account there must be a budget surplus, otherwise the bank will reject the loan application.