Home Financing: The Biggest Errors - Part 2
One learns from mistakes. Unfortunately, this wisdom does not apply to mortgage lending. For there is rarely a second chance here, a misstep may mean the financial ruin of a family.
Whether it's an apartment, tenement or home - a property is an investment that pays off in the long run: using your own four walls will help Accumulation of assets and, at the same time, give the owner the security of being able to live peacefully at retirement age without having to pay rent. According to German tradition, the building loan is a relatively safe matter - both for debtors and creditors. Nevertheless, we want to clear some of the errors away at this point.
This is the second part of our guidebook article, "Home Financing: The Biggest Errors & ldquo;". The first part can be read here.
One percent repayment is sufficient
The tradition is stubborn and consistently enforced - even with the Loan . Many people are of the opinion that one percent repayment in the first year is completely sufficient. In the 1990s, when interest rates were more than eight percent, that was understandable. In the low-interest phases like today, however, that would be the waste of an opportunity that you do not get every day. On top of that, the lower the repayment rate, it takes longer to pay the debt . So if you only agreed to repay one percent of your initial repayment and do not change it in subsequent years, you may need up to 43 years depending on the interest rate until you can completely pay off your debts. Only half a percentage point more reduces this time by eight years, with two percent eradication is already after 28 years debt-free. Accordingly, less costs the project home less.
With short repayment periods you remain flexible
Who once concludes a loan agreement with a bank, which must also fulfill it to the end. This not only includes punctual and complete installment payments. The contract can not be terminated prematurely, or not without compensation. The scare word of all borrowers is & quot; prepayment penalty & quot; and is an expensive affair. The fees for this compensation are often so high that it is better to continue paying the loan . .
Nevertheless, in many cases it makes sense to commit yourself to a bank in the long term: namely, if interest rates are particularly low , as is currently the case. Who can secure an interest rate of 4.50 percent for 25 years, does not go wrong. The monthly burden is stable and with an initial repayment of only 2.25 percent per annum you are already debt-free after 25 years. One is not bound to the bank: After ten years, any loan agreement can be terminated without a prepayment penalty is payable. The only prerequisite is that the period of notice of six months must be recognized.
Builders do not receive subsidies from the state
The times when the own house could be deducted from the tax were beautiful. The home owner supplement was also a welcome gift for every family. Although these advantages no longer exist for builders, the state has by no means completely separated itself from building subsidies. KfW Förderbank now offers low-interest loans that developers can use to acquire or modernize real estate. In addition, those who are committed to the environment and build energy-efficiently will be generously rewarded. The only drawback: the loan can only be commissioned and processed via a bank. Fortunately, KfW has raised its margin for banks. Credit institutions are therefore interested in bringing KfW loans to their customers. Often the already good conditions are further improved . Apart from the KfW, the federal states continue to support private builders and buyers with unrivaled low-interest loans.
The house bank advises clients best
This is just as wrong as the fact that the local energy provider is the cheapest. But many people do not opt for convenience for another provider. The situation is similar with the banks. They check whether a prospective borrower is actually creditworthy. That's easier with your own house bank, which has been running its own salary account for years and manages the savings banks.
But be careful : banks are not advisors, but primarily sellers . Accordingly, nobody should be advised by their house bank, but only let informed about the current offers. The offers can then be compared with the offers from other institutes.
Life insurance is the best financing model
Consumer advocates do not think it makes sense to combine the home loan with endowment life insurance. The idea: who already knows today that he wants to realize the dream of owning a home in a few years, concludes a life insurance and pays his contributions. After the dream property has been found, the client takes out a repayment-free loan from the insurer. For this he pays initially only the interest. If the sum insured falls due, usually after the age of 60, the builder can repay his entire loan. But this model is expensive and only worth it for the provider. Due to the current inflation, which is 1.7 percent in Germany, life insurance only generates capital.
Equity can be replaced by own contribution.
Painting, wallpapering and laying carpeting: All this is part of the in-house construction services. If you yourself are a professional or an enthusiastic layman, you can save money by grabbing hammer and trowel yourself. A tight financing, however, can not be compensated by high own contribution . We have already explained this in detail in this article. Because many builders overestimate themselves enormously in the calculation of their own performance. The work takes much longer than planned, and the costs for building materials are higher.
Rule of thumb: You can save a maximum of five to ten percent on your own - usually much less.
Artikelbild: © Andriy Solovyov / Shutterstock