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Overview of loans – Comparison of loan types

The classic: the mortgage loan

Mortgage loans are long-term loans that are secured by mortgages. The property serves the lender as security for the loan. The interest rates and repayment rates at which a bank offers you a loan depend on many factors: the more reliable the professional situation, the more valuable the property, the lower the financing requirements, the more favorable the conditions for the loan.

An important factor in mortgage credit is the chosen repayment. If you want to repay your loan faster, you should definitely agree on special repayments and choose a higher initial repayment than the usual 1.0 percent.

Number one: the annuity loan

The most popular loan among mortgage loans is the annuity loan. Annuity means “the rate stays the same” and that is the advantage of this type of loan. Your advantage: At the beginning of the building loan you know exactly how much money you have to pay to the bank each month until the end of the agreed term. The monthly installment for the loan is made up of an interest component and the repayment component. Initially, the repayment is still relatively low. However, since each installment payment shrinks the remaining debt, the interest portion of the installment decreases and the repayment component increases.

Plan for the long term

A full repayment loan is an annuity loan that repays the entire loan. A loan agreement is usually concluded with a fixed interest rate of ten or 15 years so that at least two or even three financing rounds are due. Each time, the motto is: find the cheapest interest, negotiate to lend with the bank and compare conditions. If you want to avoid this and have a high and secure income, you can finance your property with a full mortgage loan with just one financing round and you do not have to rely on a frequently fluctuating loan offer.

Annuity

Annuity

Builders who opt for an annuity loan benefit from particularly favorable interest rates and …

Loans in comparison

Loans in comparison

A loan is the right solution for many builders – especially if they are interest rate security and …

Building loans

A building society loan offers long-term planning security through the building loan: As soon as the contract is concluded …

The building society loan: solidary and reliable

After the home savings contract has been concluded, many savers pay in one pot until the target amount has been reached. A low-interest home loan, which is independent of the current development of mortgage rates, then waves. These were determined after the building society contract had been concluded. That is why a building society loan offers, above all, planning security, but low savings rates. A home loan savings contract does not require equity and can be concluded at a young age.

The credit for later: the forward loan

In the case of a forward loan, the loan amount is not paid out immediately, but at a later point in time. In this way, builders can secure the current interest rates, even if they will only take up the loan for their home finance in one to five years. The forward loan promises security for financing planning. However, it is a bit speculative: after all, there are no guarantees that the interest rate level will develop as expected. If the interest rate falls, this means that you will have to pay higher interest on your loan – plus a premium for the form of financing. A forward loan is an attractive option for follow-up financing, especially in periods of low-interest rates.

For risk-takers: variable credit

In contrast to the classic annuity loan, the interest rate for a variable loan is not fixed for the period of fixed interest. Rather, the interest is linked to the rate of interest. This is the reference rate at which banks borrow money from each other. This can change every three months. The borrowing rate for the variable loan is adjusted to these changes. This means that if interest rates rise, the borrower’s personal interest rate rises and the loan becomes more expensive. If they fall, the loan interest also falls – and the borrower benefits from the low-interest rate level.

Limited risk: the loan

Credit is a  loan with variable interest rates and a built-in risk brake. With this cap, the builders can keep their costs within limits even if market interest rates rise. However, the lower risk with such loans comes at a price: A loan is usually associated with a slightly higher interest rate than a variable loan without an interest rate limit.

Loan without equity: full financing

money

A loan with full financing offers the opportunity to realize the dream of your own four walls without a long saving period for equity. However, the following basically applies to mortgage lending: the less equity capital when lending, the higher the interest. If this reserve is not available, the banks charge interest premiums for the higher risk. A relatively high income is therefore necessary in order to be able to make the monthly payments with full financing.

Housing loan: the installment loan for owners

Housing loan: the installment loan for owners

Home loan, which many lenders refer to as home loans, is a special form of conventional installment loan. Borrowers can only receive a home loan or home loan if they own an owner-occupied property. Compared to conventional installment loans, home loans are often significantly cheaper, but somewhat more expensive than loans. The advantage over the classic Tertius Lydgate loan: the bank does not require any land charges like security, and special repayments are possible at any time for a small fee. The home loan or home loan is primarily suitable for financing modernization measures or for follow-up financing if the remaining debt is less than 50,000 USD

A personal loan – ideal for the unemployed, students and young families

Even if the money is borrowed from a private individual and some borrowers are no longer afraid of the bank as a large institution, the private loan is a binding, legally binding contract. This means that no lax payment behavior is appropriate here either. The lender can contact a collection agency in the event of a delay in payment and the reminder fees and interest on arrears are also considered here.

How to apply for an online loan

In the case of an online loan, all correspondence is processed via email and phone calls. The loan can be applied for in an uncomplicated manner and the acceptance or rejection takes place within a few days. Due to the lack of personal contact, the borrower can barely negotiate, the employees of the online bank are bound by their statutes. In a village where the bank advisor knows the customers better, it is often easier to get a loan, even with a lower credit rating. So if you do not get an online loan, you should try the house bank.

In general, it is recommended not to give up the investment project immediately because of a rejection, but to try it at another bank or with a different loan model.

Personal considerations with a loan calculator

Personal considerations with a loan calculator

If the results from a bank calculator only show loans with high-interest rates and a potential lender has already rejected the installment loan, the borrower should consider carefully whether the loan is really affordable. With the loan interest, the loan should not push the financial limit, there must still be enough money for running costs and reserves.

Why money can be saved with special repayments

Why money can be saved with special repayments

Borrowers for whom no extraordinary income is expected in the near future should nevertheless keep the chance of a special repayment open. Especially with a building loan that runs for an average of 20 years, a lot can change in the future. An increase in salary, an inheritance, smaller savings that have accumulated in large sums, etc. can make early repayment or at least partial repayment possible. If this option has not been agreed upon in the loan agreement, the bank can still insist on paying in installments. However, if this is not the case, the borrower can pay his debts earlier and therefore has to pay less interest.

If the loan should only run for a few years anyway, it should be considered whether the special repayment is worthwhile. This is often associated with high expenses. Therefore, when concluding the contract, it should also be clarified how high it would be.

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