Who would like to fulfill itself the desire of a free-hold apartment, which finds at present a historically low interest level before. For this reason, the financing of a condominium is particularly favorable in terms of interest rates, especially since long fixed interest rates can also be agreed at extremely favorable conditions. The following article deals with the topic "loan for condominium" and includes all important aspects as well as numerous tips, which should be considered around the apartment purchase.
What financing sums can I afford?
When it comes to comprehensive planning of a construction financing, future borrowers should first think about the maximum possible financing amount. The answer to the question "What financing amount can I afford?"must be answered under consideration of two aspects: the debt service ability and the maximum possible financing term. The debt service capability reflects the creditworthiness of the borrower and shows what monthly surplus can be used as a financing installment. The following formula is used to determine the debt service capacity: Net family income – lump sum for living expenses = monthly surplus. Regarding the lump sums for living expenses, it is important to know that the lump sums calculated vary from bank to bank (for example, 30% of net income for the first adult, 300.00 euros for each additional adult, 200.00 euros for each child). With regard to the maximum financing term, the age reached at the start of financing is the most important factor. In accordance with consumer protection requirements, achieving freedom from debt by the start of retirement is an absolutely mandatory criterion. The maximum financing term should therefore always be based on the time remaining until the planned retirement date. With the help of the monthly installment as well as the possible financing period in years, the maximum financing amount can be easily calculated, assuming an example interest rate:
Example:
- Age of the borrower: 30 years
- Possible repayment rate: 1.000.00 euros
- Example interest rate: 2.80%
- Fixed borrowing rate: complete financing term
- Assumed retirement age: 65 years
-> In the remaining 35 years, the borrower in the above example could finance a sum of 267.500,00 Euro repay.
How should one proceed with the financing of a free-hold apartment?
Good financing for the purchase of a home stands or falls with its planning. If the desire for a condominium is already determined early, then several years before the planned start of financing should already be begun with the accumulation of equity capital. Equity is of critical importance when it comes to selecting financing components as well as finding terms with the bank. A high equity ratio, for example 20 percent of the total cost, ensures a low loan-to-value ratio, which is crucial for the "absolute low interest rates". In addition, equity avoids blank portions of the financing, which can quickly drive up the interest costs. If it is then finally so far and the first financing discussions lining up, one should prepare oneself in the apron as well as possible and bring absolutely complete and meaningful documents with to the bank (among other things salary proofs, list of the monthly fixed costs, existing object documents). By this procedure the planned financing project can be represented in the best possible way opposite the bank, which can be quite the proverbially well-known "tongues at the balance" with "scarce financings. In banking jargon, this is referred to as "personal creditworthiness" (Is the borrower reliable? Does the borrower have an overview of his finances??).
Possible financing components for the purchase of an apartment
When it comes to building financing for home purchase, it is first important to understand that modern construction financing usually always consists of various financing components (equity portion plus various loans). This is simply due to the fact that 20 or 30 years ago there were far fewer financing options (no Riester financing, for example). In addition, banks only ever grant their best conditions up to a certain loan-to-value ratio, which is why financing with a low to moderate equity ratio usually involves a loan in the amount of the 80% loan-to-value ratio and a separate loan for the unsecured portion above this amount. Also the consideration of national promotion ("WohnRiester" building savings models or riestersporderte loans) as well as public means belongs in the meantime firmly to the defaults of a consumer protection-fair Baufinanzierung. In particular, the Kreditanstalt fur Wiederaufbau, or "KfW" for short, offers a very attractive financing component with its so-called "Home Ownership Program".
The KfW Homeownership Program provides up to 50 percent of the loan amount to each borrower, regardless of their credit score.000,00 Euro available (fixed interest rate: 10 years, current interest rate: 1,70%). A special feature of the KfW building block is the fact that KfW does not require first-ranking security and voluntarily moves to subordinate status. The customer thereby receives a top condition, without the framework of the first-ranking loan is reduced. If you want to buy an existing condominium, you should also take a close look at the financing programs "Energy-efficient refurbishment" and "Age-appropriate conversion". These financing programs are particularly recommended if apartments are to be completely remodeled or comprehensively renovated and the borrower wishes to have the modernization work carried out exclusively by specialist companies. The two KfW programs mentioned "entice" with favorable conditions starting from 1.00% (10-year fixed interest rate) and partly even include a repayment subsidy.
Tips around financing a condo
Around setting up financing to buy a home, prospective borrowers should not forget one thing: they are currently in a historic low in interest rates! The current time allows one thing above all: very safe financing with really low total costs. However, this can only be achieved if the borrower also thinks outside the "box" of the 10-year debit interest rate commitment when putting together his or her financing. Historically, it has certainly been advisable to always lock in loan terms for 10 years, as terms have moved lower and lower. In the future, however, with a view to the next 10, 15 or 20 years, interest rates are clearly expected to rise. It is in this connection very important that borrowers do not pay attention up-to-date only to the "shop window interest rates" for 10-year fixed interest rate, but also offers with a longer fixed interest period let themselves give. Constant models with a term of 25 to 30 years can now also be concluded at an interest rate of around 2.80%, which ideally combines the goals of "planning security" and "low cost. Irrespective of the conditions, borrowers should attach great importance to flexibility with regard to repayments as part of their financing advice. Annual unscheduled repayment rights in the range of 5.00 to 10.00% of the original loan amount are now part of the "good tone" and should be offered free of charge by the bank. Particularly interesting, however, are also free repayment changes within the fixed interest rate, which are offered in particular by mortgage banks and provide great freedom.
Conclusion: If you are planning to buy a condominium, you can currently enjoy historically low interest rates, which also allow the repayment of larger financing sums at low cost. In the context of consumer protection, the criterion "debt-free at the start of retirement" should never be disregarded and, in addition, it is highly advisable to also look at longer fixed interest periods. As a borrower, this gives you a great deal of planning security, which is important for high financing sums – after all, interest rates will also rise again "at some point"..