A needs-based and individual construction financing, which is adapted to the personal as well as financial framework conditions of a customer, is not simply "off the shelf. For a really good construction financing, numerous aspects must be considered, which go far beyond the loan interest rate. The following guide contains numerous tips and tricks on the subject of construction financing and also mentions some topics which should be treated with attention in the course of financing advice.
Fixed interest rates and interest rate hedging – (not) a question of mentality
If you are looking for construction financing in the current era of low interest rates, you can truly consider yourself lucky. The historic interest rate low ensures that the repayment portion of the monthly installment is higher than ever before, so that annual repayments of 2.00% or 3.00% are easily possible directly at the start of financing.
The monthly installments are low, even in the case of full financing or financing with a low equity ratio, so that a broad customer clientele can demonstrate a positive debt service capability and thus fulfill their desire for their own four walls. However, far too many borrowers only look at the first ten years when designing their financing and still choose the classic fixed-interest period.
However, it should not be forgotten at this point that the "10-year fixed interest rate" method dates back to times when interest rates were significantly higher, so that when the interest rate expired, it always continued with lower interest rates. Now, however, the situation on the interest rate market looks significantly different, which is why it is absolutely advisable to think about longer fixed interest rates of 15, 20 or even 25 years in 2015. Of course, borrowers with a long fixed interest rate do not get the "shop window interest rate" from the TV commercials, but depending on the financing constellation, they get planning security and a good gut feeling for the entire financing period. Constant models and "full repayment" loans are also possible if long fixed interest rates are chosen.
With the construction financing form quickly to the best offer for your construction financing
Naturally the choice of the interest fixed period is always a mentality and type question, but the fact that the present low-interest phase will not constantly continue the next 10, 15 or 20 years, should be actually clear to each borrower. In addition, long fixed interest rates are not obligatory for the entire period.
After the first ten years, every borrower has a legal right of termination, so that long fixed-interest periods are not a "one-way street" in the event of even lower interest rates. Especially for construction financing with a loan volume of 300.000, 400.000 euro or more may not be forgotten in addition that an extremely high interest rate change risk exists, if after expiration of the first ten financing years still remaining value of 200.000 euros or higher must be prolonged.
Interest-subsidized loans are part of modern construction financing
Every borrower should make sure in the context of the construction financing consultation that all possibilities from the ranges national promotion as well as interest-subsidized loans are offered to him by its bank. The Riester subsidy is particularly attractive for borrowers with children, as it provides allowances and tax benefits throughout the entire financing term. The state-subsidized Riester allowances, which for a family with many children can easily amount to more than 1.000.00, help to repay the loan and can be seen as a kind of "special repayment from the state".
The financing models of the living Riester in such a way specified, which are offered with emphasis by building savings banks, offer in addition interest security for the entire financing term as well as very flexible special repayment possibilities. In the field of interest subsidized loans, the Kreditanstalt fur Wiederaufbau, better known as "KFW", is particularly worth mentioning. The KFW Bank offers numerous programs with interest-subsidized conditions, which provide favorable conditions especially for energy-saving and age-appropriate modernizations. In addition the KFW offers even programs with a repayment subsidy, which are cost-technically very attractive.
With the home ownership program, KFW offers every person who builds or acquires residential property in the Federal Republic of Germany a loan up to 50.000.00 euros to. With this program there are no further criteria, which must be fulfilled by the borrower, why a bank must have already really "good reasons", if in the context of a construction financing this program is to be renounced.
Unscheduled repayment options and repayment changes are a must-have
Unscheduled repayment options are actually part of "good form" in modern construction financing and should be included in loan agreements as a mandatory requirement. Annual unscheduled repayments in the range of 5.00 to 10.00% of the original loan amount can usually be built into the loan agreement at no charge.
For the granting of higher unscheduled repayment options, many banks require the payment of a so-called "option premium". In such a case, one should carefully calculate whether it is realistic that higher unscheduled repayments are really needed for the future. In addition also free repayment changes are very interesting, which are offered by numerous banks for the period of the debit interest connection. By free repayment changes, which are uncomplicated and flexibly accomplished, a borrower has the possibility of being able to adapt its loan rate always to its personal situation and possibly changed life circumstances.
The protection of the borrower and the object completes the financing
The construction financing becomes only the "round thing", if also the topic security was treated in the context of the financing discussion. With residential building insurance, term life insurance and occupational disability insurance, there are three insurances that provide important protection for the borrower and the object of financing. In particular with families with a main earner in each case it should be made certain that in the course of the financing a risk life insurance is locked. The term life insurance should have an insurance benefit, which is always analogous to the open remaining debt of the loan.
This approach can also ensure that the wife and children can remain in the property in the event of the death of the main breadwinner. Disability insurance, on the other hand, ensures that the monthly loan installment can continue to be paid in the event of disability. Extremely important and from bank view often obligation criterion for the financing promise is the housing insurance. During the financing period, numerous unexpected things can occur, and in the event of a severe storm, homeowners should simply be assured that all damage to the property is insured.