Construction loan: beware, debt trap!

Construction loan: beware, debt trap!

Home builders are lucky, as interest rates are currently lower than ever. Families whose budget for a loan has been inadequate to apply for it are now also quick to apply. But beware, especially with such families, the risk is great to fall into the debt trap. The following article shows what the credit for the future dream home should be:

Cheap money has always been a problem for weak people. It lends quickly to debt-making and to ignoring the long-term financing altogether.

For this a short example : A loan over 150,000 euros with a fixed interest rate of five years and one percent repayment does not have to be more than 372 euros per Month cost. Anyone who chooses such a loan will still have a remaining debt of 95 percent after five years. If interest rates are two to three percent higher in five years' time, the monthly burden will suddenly double.

Families who can no longer afford this burden because they could afford the previous installments will not only lose their property, but also also risk personal bankruptcy. An interest reduction of only one percent has been standard in Germany for many years. However, this is not enough in the current interest rate low because it extends the total term of a loan to over 50 years. Important : The higher the interest rates for the same initial repayment rate, the faster a loan will be repaid extend

To counteract the problem, mortgage advisers recommend: Extend interest rates and increase repayment. Although interest rates may currently be low, they will rise again in the foreseeable future. Already there are the first signs of higher interest rates: The DGZF Pfandbrief curve has bottomed out. In public, the DGZF Pfandbrief curve is little known. It is based on the Pfandbrief yields of the Landesbanks and the Deka Bank. This makes it even

more informative than the yield curve of ten-year Bunds . Contrary to many claims, interest rate decisions by the ECB have no major impact on construction money. They only affect short-term interest rates. A look at different statistics shows that Germany's housing buyers have recognized the signs of the times. For months, they have consistently used the historically low interest rates to agree on longer fixed rates and higher repayment installments. The average fixed interest rates rose from ten years and six months in June 2011 to now more than 13 years. At the same time, it is now agreed to repay just over two percent instead of 1.58 percent in 2011. Cheap building money for the home

Below is a small FAQ that answers the most important questions around the subject of construction money.

According to Stiftung Goods test there are long-term construction loans with a term of 20 years and fixed interest already for three percent interest. Through the combination with Riester subsidies, building societies lend the loans with effective interest rates of between three and 3.6 percent. Fixed interest rates and loan installments are set as well as a term of 18 to 30 months. According to the Federal Statistical Office, real estate is still cheap in a ten-year comparison, even though prices have risen in recent months.

Can real estate be described as a good investment?

Real estate is not a return hit. According to consumer experts, they are a sound investment especially in times of crisis. This is currently proven by the German market. Here, demand for real estate is so strong that prices are skyrocketing. Nevertheless, a real estate purchase should be well considered. Important are: price, quality and location of the house.

How to find a cheap loan?

Here is just a comparison of the different providers. According to Stiftung Warentest, the range of loans is as big as never before. Interested parties therefore need one thing above all: time. The choice of a loan should not be rushed.

How does a home loan work?

Real estate loans usually run between ten and 30 years. The interest is usually set only for a certain period of a few years. If the fixed interest period expires, the customer negotiates with his bank about the extension of the loan. At this time, the borrower can also repost and switch to another, cheaper provider. Consumers should request new quotes a few months before this deadline expires.

Are Credit Rates Always Committed?

Monthly installments are usually fixed monthly. In construction loans, consumers often have the right to special repayment, so they can repay the money in addition to the agreed rates. In addition, builders often have the right to adjust the loan installments as income changes.

How high should equity be?

Financial experts recommend equity of 20 to 30 percent of the house price. For top rates, banks often require at least 40 percent equity. Some banks are already financing the full purchase price. These full financings are, however, very expensive and risky and not recommended.

Does the state promote my house construction?

In principle, there are numerous subsidies from the German state. The state development bank KfW grants loans for the purchase of owner-occupied housing, for age-appropriate housing and energy-efficient construction and renovation. In addition to this subsidy, the state pays the housing premium of 8.8 percent in home savings. Builders also have the option of deducting loan repayments partly from their tax.

What happens if I become unemployed or incapacitated for work?

The risk of unemployment or incapacity for work exists at any time. For this reason, homebuyers and builders should suitably secure. There are insurance against unemployment, disability, but also life insurance and residual debt insurance.

Artikelbild: © wavebreakmedia / Shutterstock


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