Building loan – interest and conditions in comparison.On January 8, 2020 by Ethelyn Murphy
Those who opt for a building loan have various options, because there are a total of four financing models available to implement a building loan. Each home loan model has its own advantages and disadvantages. The classic construction loan includes the annuity loan, the maturity loan and the mortgage loan models.
In order to benefit from these three financing models, top priority must be a good private credit checker information as well as a good credit rating. With this variant, borrowers usually choose a 10-year fixed interest rate. In addition to shorter fixed interest letters, which can be between 5 and 20 years, a term of up to 25 years is also possible. More information can be found under the construction loan comparison.
Insurance grants the building loan
If a construction loan alone realized by a building loans, an equity share of between 40 and 50 per cent is required. At the same time, the borrower has to accept a waiting period for the allocation of his building society contract. However, this can be avoided with a risky and more expensive variant: You combine a repayment-free loan with a home savings contract. The loan is not repaid, only the interest is paid. At the same time, one or more home savings contracts are saved. If the building society contract is ready for allocation, it replaces the repayment-free loan. This model is therefore not only the most risky, but also the most expensive.
Another extremely risky loan option is a construction loan in combination with life insurance. In this case, insurance grants the building loan, the life insurance itself serves as repayment for the building loan. The wish: At the end of the life insurance term, the payment amount due there should correspond to the amount of the loan. However, since this amount cannot be guaranteed, the borrower usually has a problem in the end: because money is lacking, a new financing option must be taken up. Therefore, this variant is definitely not recommended.
The constant loan is an ideal form of loan for young families and security-conscious investors. It is a mixture of annuity loan and home loan contract. The advantage: The borrower pays a consistently high monthly rate over the entire term. Those who value prepayment protection choose a callable loan. In the event of early termination, the calculation of a prepayment penalty is excluded. If you want to use real estate as an investment, you should rely on fixed loans. The fixed loan is issued for a certain term, interest and principal are repaid. The interest can then be tax deductible. Another advantage lies in the fact that the repayment portion of the fixed loan offers great opportunities for wealth creation.
Loan with early repayment protection
If you rely on cancellable loans, you can take advantage of various options. A borrower, for example, completes a callable loan and then pay an interest premium. If the loan is to be repaid early, there is no prepayment penalty. Borrowers should make sure that there is no blocking period. In most cases, even cancellable loans cannot be canceled in the first three years. Borrower B opts for a callable loan with early repayment protection. In this case, the borrower pays a one-off amount in addition to the actual callable loan, which is based on the need for protection. For example, hardship cases such as unemployment, death, incapacity for work or a divorce can be covered. A job-related move can also be secured.
A combination of these two variants is also possible. This is the case, for example, if the hardship occurs during fixed interest rates and the property has to be sold. In this case, the callable loan can then be redeemed without paying a prepayment penalty. The cancellable loan also offers great protection against financial losses. These cancellable fixed-interest loans are therefore particularly suitable for people who use their property themselves and do not want to see their building finance restricted (so-called hardship case insurance).
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