Rising interest rates: How to get the cheapest construction loan

Rising interest rates: How to get the cheapest construction loan

For years, the interest rates for real estate financing in the historical low, effective annual interest rates below 2 percent were possible. This led to growing construction activity and rising real estate prices, especially in the major cities that were in demand anyway. But there are increasing signs that this long-term low-interest phase is coming to an end. Rising interest rates increase the cost of mortgaging, they are also a further risk with falling house prices. With these funds, you can place your mortgages on a secure, but also flexible foundation.

Tip 1: Rely on planning security

An essential feature of mortgage lending is the fixed interest rate. They agree with the bank on a fixed interest rate, which is valid for five, ten or more years. Regardless of the market developments, you can then plan for the long term and know how much has to be refinanced at the end of the term, for example. For this fixed interest rate, the bank makes a premium, which is usually in the range of half a percentage point. Statistically, current market rates are well below the long-term average. Fixed interest rates of ten years or more are therefore recommended. Because the law grants you the right in this constellation to terminate the construction loan after ten years once and unilaterally. The approval of the bank is not necessary for this. Theoretically, longer fixed-interest periods are also possible.

Tip 2: Use free capital for special repayments

If you have already completed years ago and have a comparatively high interest rate, unscheduled special repayments are worthwhile. How much and how often you can make use of it is governed by the loan agreement. Normally, the bank requires timely notification, sometimes exceeding three months. Alternatively, you should check whether, for example, the repayment rate can be changed. This is the part of the monthly annuity that is applied regularly as a fixed amount. Also note that such special repayments are for you at no extra cost. There are no prepayment penalties that would be incurred in the event of early termination.

In standard loan agreements with interest rates fixed up to ten years, unscheduled repayments are not entered by default. In any case, you can negotiate with the bank about the terms and conditions for such unscheduled payments. Agree on absolute limits to benefit early from interest rate savings.

Tip # 3: Bring in collateral

Banks use lending rates, which calculates the maximum loan amount. The market value is calculated by an expert, this process must be repeated regularly depending on the constellation. Try to convince the bank of your credit rating with collateral or guarantees. The interest rate that the bank actually awards in most cases is determined using the & quot; 2/3 example calculation & quot; specified. You will find these mandatory in the tariff information in credit comparisons, the Price Indication Regulation (PangV) dictates that. The bank may therefore only advertise with an effective annual interest rate, which at least two thirds of all credit customers also get. This allows you to effectively compare offers.

Tip # 4: Keep an eye on follow-up financing

You can use a repayment calculator to easily calculate the interest charge on your desired real estate loan. The lower the repayment installment, the longer the financing runs. And the higher the interest you have to bear in the end. It always gets problematic when a follow-up financing becomes necessary after a few years. Because then you have to finance at the current market interest rates, which at the same repayment rate sometimes leads to much higher monthly installments.

With a forward loan, you can secure favorable interest rates up to five years in advance. It's a classic annuity loan, so you pay a consistently high monthly rate. In fact, the loan amount will be paid out some time after signing the contract. Lead times of up to 60 months are possible. In return, the bank receives a low interest charge. In times of rising interest rates, the whole thing can therefore pay off within a very short time.

Consider in good time before expiry of the interest rate fixing on which repayment and interest rates you can finance the follow-on financing. Take advantage of rising interest rates to ensure up-to-date market conditions for a certain period of time.

Tip 5: Take advantage of state support measures

The state has an interest in high construction activity, and promotes these and other measures by state-owned ones banks. KfW is the first point of contact in this area; in addition, there are regional or municipal promotional banks. For example, they assume part of the financing for old building renovation, energy modernization and other measures. Also explicitly planned as low energy house or energy efficiency house planned building projects are promoted. Compared with classic modernization loans, KfW's offers have the special feature that they are explicitly granted for a specific purpose. Whether it's about new energy standards, the energy-efficient refurbishment or an investment grant for individual measures - there are support programs for every occasion.

Conclusion

Do not let simple promises guide your decision to buy mortgages. Think through and calculate mortgage lending, make comparative calculations, and decide how to react in certain situations. Both for new construction projects as well as measures on existing properties there are extensive subsidy and support measures from the state. In addition, it can be helpful to split the actual loan requirement into several individual loans. In this way, you can better absorb changes in interest rates, make more use of special repayments, and be more flexible.

Summary

In order to save on mortgage lending, you must keep an eye on credit conditions and promotional measures. Unscheduled unscheduled repayments reduce the interest charge and the repayment term. Particularly energy-efficient construction projects and renovations are promoted. At the same time, favorable interest rates can be secured for a certain period of time by means of a forward loan. This makes it easier to plan follow-up financing.

Artikelbild: © baranq / Shutterstock


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