Which loan is suitable for real estate financing?


Buying a property is a big step. Financing is a particularly important factor. As a rule, this is largely financed by loans.

If you choose and organize the right financing, you will save a lot of money over the years. A real estate financing often accompanies you for 15 years and longer.

The right financing also guarantees that the type of repayment fits your personal situation.

This article discusses the different options in real estate financing and how to find the right option for you.

What options are available when choosing real estate financing?

First of all, banks offer loans specially adapted to the financing of real estate. These real estate loans have some advantages for you.

Thus, the APR is lower than for other consumer loans. This is due to the fact that the property itself serves as collateral, and thus in the event of default, in any case, a mass with value for the bank is preserved.

The real estate loan also differs from other loans in the way it is disbursed. The construction of a house drags on for a long time, not infrequently for more than a year. Higher costs are incurred continuously and in stages.

For this reason, the payment of the real estate loan can also be divided into partial amounts. They can be directly linked to specific invoices, for example, the developer's down payments. For you, this has the advantage that the interest burden remains low at the beginning of the construction phase.

Interest accrues only on the amounts actually disbursed, not on the full amount committed. In addition, the bank thus ensures that the disbursement amounts actually go to the construction of the house.

Among the things you should keep in mind when taking out a real estate loan continues to be the form of the real estate loan. Common is an annuity loan. This variant is characterized by a constant loan rate that remains the same over the course of repayment. This ensures that at the beginning of the financing the share of interest is higher and the actual repayment is lower.

As repayments continue, the ratio changes. As a full repayment loan, the loan is designed so that the entire debt is paid off with the last installment.

Another important point is the loan interest rate fixation. This is often ten years. During this phase, the interest rate of the real estate loan remains constant. There is also the possibility of taking out a loan with a longer fixed interest rate. This provides a stable loan that is calculable in the long term. Especially in phases of low interest rates, a long commitment makes sense.

The alternative is variable loans. In this form, the interest rate is adjusted every three months to the current market situation. You as a borrower benefit from better conditions and lower interest rates with a variable loan. At the same time there is more risk, because when interest rates rise, the cost in a variable loan also rises.

Finding the right real estate loan for your project

The volume of a real estate financing is usually in the six-digit range. Therefore, it is especially important to look for a loan with advantageous conditions.

Even a difference of only 0.25 percent in the APR on a loan of 500.000 and a term of 25 years results in a difference of 15.840 euros over the term of the loan. So by diligently searching for a loan, you can save a lot of money.

This applies both to the construction of a single-family home and to the purchase of a vacation home for owner-occupancy or rental purposes.

A help in the search for real estate loans are the comparison platforms on the internet. With these you can quickly find numerous offers for real estate loans. You can use the filter to set the loan amount you need and the term you are aiming for.

The platform then searches for specific loan offers for construction financing. On the basis of the clear representation you recognize immediately the basic conditions of the individual credits. This includes the effective annual interest rate and the amount of monthly installments.

You can apply for the loan online and thus save time and reduce the effort once again. The search via comparison platforms is thus faster and easier than contacting each bank individually.

Combine a real estate loan with other loans and grants

Building or buying a house is an expensive affair. Therefore, you should exhaust as much as possible all means of promotion and easy financing.

If you have children, the construction child benefit is a valuable subsidy when building or buying a home. The building subsidy is applied for directly after moving in and amounts to 12.000 euros per child over a period of ten years.

Another option is to take advantage of a kfw grant for energy-efficient construction. You should take this into account directly when planning the construction. Subsidies such as the grant for a fuel cell are available for new buildings as well as for existing buildings. This amounts to up to 34.300 euro per fuel cell.

Kfw bank also provides construction loans with very low interest rates. Even if this only covers part of the cost of your construction project, you will reduce the total cost of your property. That's why it makes sense to invest some time in planning financing based on multiple sources.