Renovation loan: Financing renovation with a loan

Increase mortgage for the renovation?

You can choose to take out a (second) mortgage. In many cases, the interest will be slightly lower than the interest for a personal loan or revolving credit. With a (second) mortgage, however, you must take into account one-off costs such as notary fees, appraisal fees and consultancy fees for the advice. In many cases, consumer credit will be cheaper. An important point in the trade-off between the different types of loans is tax deductibility.

The ideal duration

The ideal duration

When determining the term, it is wise to look at the purpose of the loan. The term of a loan used for a new kitchen will, as a rule, be shorter than that of the loan used for an extension to the home. It is also important to look at your personal situation so that you are able to continue to meet your monthly obligations during the entire term.

Benefits personal loan

Benefits personal loan

With a personal loan, you know exactly where you stand. Both the term and the interest are fixed in advance. With older loans, you had to pay a penalty interest in the event of early (extra) repayments for the loss of the calculated interest. Nowadays you can repay the loan free of charge. The interest that you pay for the loan that you use for the purchase, improvement or renovation of the home is tax-deductible.

Benefits of revolving credit

credit,money

With revolving credit, you can pay off (extra) without penalty. Certainly, in the event that you expect to make additional repayments during the term of the loan, this can be a good solution. With revolving credit, you also have the option to withdraw repaid amounts. This way you benefit from optimum flexibility. However, the interest that you pay for a revolving credit concluded after 1 January 2013 is not tax-deductible.

Protect your financing

A renovation of your kitchen or bathroom can go down well. To ensure this (high) loan amount, so that you borrow without worry, we have a credit protector for your loan. This insurance temporarily takes over the payment obligation from you in the event of unemployment or disability. The insured amount is released in the event of death so that you do not leave your relatives behind with your loan.

Renovate or move

Renovate or move

Do you have doubts about renovating or moving? Then view our “renovate or move” page.Take out a personal loan to make improvements to your home, the interest costs are tax-deductible

Loan calculator – compare conditions and save

However, what has changed is loyalty to the house bank. While traditionally the house bank was asked for a loan, more and more borrowers are now comparing the offers of different banks. With the credit calculator, these can be determined quickly and clearly and compared with each other. 

What interest is currently being charged on a loan?

For many borrowers, the lowest interest rate is the key selection criterion. For a loan of 10,000 USD with a term of two years, the interest rates of the Austrian banks this year are between 3.90 and 7.80 percent, which can make a difference in the monthly rate of up to 18 USD. Overall, this is a significant financial difference. Therefore, a loan calculator should be consulted for comparison before buying a car or buying a house.

How can grants finance housing loans?

home loan

In Austria, there are many grants that can make it easier to buy a house or build a Moomin. Many of them are financed by the state of Austria, but the majority are offered at the state and district levels. A particularly generous subsidy is the housing subsidy with additional family support. In order to be considered, however, certain income limits must be observed, which may differ depending on the federal state. Häuslbauer should not miss the subsidies for renewable energies, housing renovations, photovoltaic systems, and boiler renewals. Several grants can be applied independently of one another. It is only important that the applications are submitted before the start of the construction project. Commitments can affect lending by having to take out lower loans and therefore offering a different interest rate and / or a shorter term.

Criteria when choosing a loan provider

Criteria when choosing a loan provider

Interest should not only be taken into account when choosing. Low-interest rates do not necessarily mean the cheapest loan in the long term. The additional possible costs, such as the processing fee or a possible penalty for early repayment, should also be carefully studied.

Depending on the bank, the general conditions can also be very different. The future borrower must be clear about the term, the possibility of follow-up financing and all other contract terms and must inquire in case of doubt. Only a little more than 10 percent of all Austrians with credit stated in a survey that they had read the “fine print” in full.

Choose the right lender

If you want to take out a residential loan, you can use the general calculators as well as the special calculators of the individual banks, for example, a loan calculator for buying a house. If the branch search was successful, the best tariff must now be selected. Again, it is important to pay attention to general conditions. If a specific lender has already been chosen, a personal discussion with a bank advisor should be sought. Not only are the various loan models presented in detail again, but there is also the option of individualizing them, for example in relation to special repayments and differently high rates.

When is the best time to get a loan?

When is the best time to get a loan?

Due to the economic crisis, the key interest rate is currently lower than ever. Experts do not expect a significant rise in the key interest rate in the near future either. It is now a good time to take out a building loan. As the average term is 20 years, a fixed interest rate should be chosen. The current base rate of zero percent cannot fall any lower. However, as soon as the economy recovers, interest rates will rise again, which savers are happy about, but is rather unfavorable for borrowers. It is therefore advisable to secure the low-interest rates permanently. For comparison, it is best to use the loan calculator for financing Moomin control.

How much credit is financially possible?

How much credit is financially possible?

Before a concrete selection is made with the loan calculator, the future borrower must find out about his financial options and determine the resilience. An important step in this is to compare the regular income with regular expenditure. Depending on how high the loan amount is, a long period should be taken into account. In the case of a construction loan, at least twelve months have to be used to calculate the average income and expenses in order to obtain the most reliable average possible.

In order not to take any risk with the loan, the entire monthly surplus for the installment payment should never be planned after the calculation by the loan calculator. Especially when there are no further savings, at least a third of the amount should be retained as household money. Online loan calculators for home purchases include all of these contingencies.

How is the credit rating determined?

How is the credit rating determined?

It is highly recommended that you obtain information from the Austrian Credit Protection Association. The cost of 22 USD is a worthwhile investment since the borrower can use the loan calculator for home financing to determine in advance how the banks will assess his creditworthiness, which in turn is an important basis for negotiation.

Especially when it comes to large loan amounts, the banks will require collateral from the borrower, such as existing Moomintroll or land, savings books or proof of income. The poorer the credit rating, the worse the conditions for lending will be so that despite low key interest rates, interest rates of up to seven percent are still possible.

Consider other forms of credit in the credit calculator

credit  and calculator

Home loan loans are currently no longer as attractive as they were a few years ago. This is because the key interest rate is so low and low-interest rates are offered even with a home loan without a previous construction account. It is therefore not absolutely necessary to invest the money for six years in order to get good interest later. Instead, many banks offer an installment loan that is specifically tailored to residential finance. The advantage of this is an even larger selection because now online banking with instant loans or personal loans is also an option. For singles, students and young families, in particular, this is often the only way of financing. Such loans are usually only offered for consumer financing, but if there is a private person who is willing to lend a large loan amount, there is nothing to stand in the way of financing. Depending on the amount of the loan, however, a higher interest rate is very likely, so that the risk is worthwhile for the creditor.

This is how the results of the interest calculator are correctly evaluated

For a home loan calculator, it should not be the target or nominal interest rate, but the effective annual interest rate that should be used for the comparison. Only the APR takes into account all additional costs associated with borrowing. Processing fees, insurance contracts, the commission for the provision, account management fees, and other aspects may differ depending on the bank. The borrower should pay special attention to the default interest rate. This is on average more than four percent, and a delay in payment is accordingly expensive to pay.

An important aspect of the credit rate: the chance of special repayments

Special repayments can make a loan significantly cheaper than originally planned and shorten the term. The prerequisite for this is that these are contractually permitted. This is highly recommended for private customers. Here, too, it must be clarified with the bank which expenses are associated with this and from when a special repayment is possible. Every home loan must have a minimum contract term of five years.

 

Debt restructuring despite attachment

 

Debt rescheduling despite seizure is completely impossible and impossible at the house bank or state banks. However, various offers online can be used to implement the desired debt restructuring without the borrower having to forego fair terms and flexible contractual terms.

It is important to choose a loan that is well considered and meets your own requirements. With an online comparison, a free overview of adequate offers can be created and an option can be generated to exclude overly expensive loans from the outset and to rely on cheap offers.

Search right and save

Search right and save

Even if it is extremely difficult to carry out debt rescheduling despite a garnishment, it is not impossible and does not require the potential borrower to forego favorable interest rates and flexibility in the contract. In a direct comparison, not only the interest should be considered, but above all the requirements and requirements for the applicant.

If an offer matches your own ideas and is therefore convincing, the applicant always makes the right decision for a cheap and suitable loan. Since seizure of property can often be ruled out in the case of a seizure, the lender must be offered a different kind of security and liability must be handed over to a guarantor in the event of non-repayment rates. The guarantor can be liable with existing creditworthiness, but also with real assets or financial investments and thus assume liability for rescheduling in spite of attachment for relatives or friends.

If a free financial service provider is commissioned to search for a cheap loan, the attachment should already be shown in the online application and thus a correct search should be encouraged. Since the financial intermediary knows about the applicant’s financial situation, he can immediately ask lenders who, despite attachment, provide financial assistance and accept a surety as security. For a reputable lender, openness is a particularly important aspect for a positive decision.

Compare online and involve private donors

Compare online and involve private donors

More and more private donors are presenting attractive offers online and creating opportunities for debt restructuring despite attachment. In order to find a private investor and to meet the request for debt restructuring, serious portals are available on the Internet. In this portal, lenders and borrowers come together, can negotiate terms and conditions with each other and rely on a tested and secure platform.

If private donors are to be shown in a direct comparison, it is worth registering in portals where this option is available and which offers enormous advantages for applicants with attachments. A corresponding loan can be found for all claims and secured with a guarantee. Should payments fail to materialize, the lender has created the opportunity to entrust the guarantor with liability and to limit the damage.

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

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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.

How is your loan amount calculated?

How much you can borrow depends, among other things, on the level of your income and the type of income. Read more in this blog about how lenders reach a responsible credit limit to ensure that you can borrow money responsibly.

Calculate responsible credit maximum

credit,money

To ensure that you are going to borrow in a responsible manner, the lender looks at the so-called ‘responsible credit maximum’. The credit maximum is calculated by taking your net (family) income and subtracting the housing costs and a fixed standard for living. The result of this calculation is called your ‘discharge capacity’.

Determining factors responsible for borrowing money

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There are also a number of specific factors that influence a responsible credit maximum. Consider, for example, your income structure. Do you receive a 13th month or extra allowances? Do you have a temporary employment contract or a permanent employment contract or a pension income? Current loans or credit facilities are also regarded as an important part. All these factors influence your borrowing options and therefore also the maximum borrowing amount.

Personal loan or revolving credit?

Personal loan or revolving credit?

Do you want to take out a loan? In addition to the fact that it is useful that you know in advance how much you can borrow, it is also good to know in advance what type of loan you want to take out.

You can choose from a revolving credit or a personal loan.

Do you want to borrow money for a major purchase? And know in advance how much you pay per month in interest and repayment? Then a personal loan offers a solution. The term, the interest and the monthly amount are fixed for the entire term of the loan. So you know exactly where you stand.

A personal loan also has the advantage that the interest is tax-deductible if you use the loan amount for a renovation or improvement of your house.

Do you need more flexibility and financial scope in unforeseen circumstances? Then a revolving credit can offer a solution. You only pay interest on the amount withdrawn.

You can keep a part of the borrowed amount in reserve, for example for a renovation or unforeseen expenditure. You do not pay interest on this. With revolving credit you pay a monthly repayment that is usually a percentage of the credit limit (for example 1%, 1.5% or 2%). It also happens that you pay a percentage of the outstanding balance.

With revolving credit you can always repay without penalty and withdraw the repaid amount. In this way, you are assured of a piece of financial space and you can dispose of the money immediately in the event of unexpected expenses. The interest rate of revolving credit is variable. This means that it can vary and depends on the current market interest rate. Do you want more certainty? Then the personal loan is the best loan option!

 

Residual debt insurance – these are the advantages and disadvantages

There is no conversation in a bank branch about a loan that you are not necessarily advised to take out residual debt insurance. There is a simple background to this: if you take out residual debt insurance, your bank advisor usually earns in the form of a commission.

Of course, one should not forget that residual debt insurance makes sense in a number of cases and can become very important protection for many borrowers. But not in every case. Often enough, the disadvantages of residual debt insurance also outweigh the disadvantages and then this type of insurance makes your installment loan unnecessarily more expensive. Therefore, before taking out a loan, it is important to consider carefully whether residual debt insurance is useful and important, or whether you could also do without this insurance in this special case.

What exactly does the residual debt insurance do?

What exactly does the residual debt insurance do?

The residual debt insurance is a protection of the borrower, or in the event of death of the survivor or the heir of the borrower, against exceptional financial situations. The following can be secured:

  • the death
  • Illness / accident etc.
  • unemployment

The benefits look different depending on the insured event. If the death occurs, the residual debt insurance immediately takes over the entire outstanding loan amount, so that the surviving dependents no longer have to worry about the open credit. This variant is a must, especially for larger loans – especially if there are children in the household and the sudden death of one parent would already cause considerable financial confusion in the household.

In the event of illness or an accident, the residual debt insurance can in many cases be designed in such a way that if the continued payment of wages ceases, it will cover the ongoing credit costs for the duration that you are unable to work and therefore only receive sick pay.

You have to consider this with a residual debt insurance

A classic occupational disability is often not covered by the residual debt insurance. As long as sickness benefit is paid here because e.g. B. If an acute illness persists, the residual debt insurance applies due to illness. However, if a full pension for disability would be granted, the benefits would not apply in most cases. You can only rely on permanent coverage in one of the two cases if there is an explicit provision for disability or disability in the respective insurance contracts.

If the inability to work due to illness or accident ends and you receive your normal salary again, you will bear the costs of the current loan independently from this point on.

If unemployment occurs, the same mechanism usually applies as in the case of sickness benefit. If you start a new job, you are again in the obligation to pay – even if your new income is lower than your previous one.

What are the benefits of residual debt insurance?

What are the benefits of residual debt insurance?

It provides reliable protection in the three situations mentioned. The good thing is that in most cases you can only take out separate components of the residual debt insurance. Because some professional groups only need to think about different scenarios to a limited extent. For example, a civil servant or a public sector employee who runs a collective agreement does not run the risk of losing his job. Protection against unemployment is not necessary here.

If you have traditional sickness insurance, sickness insurance covers the difference between your sickness benefit and your monthly salary. In this case, the residual debt insurance is not necessary and only causes additional costs.

Unless you have good life insurance that provides certain financial security for your surviving dependents, death should always be considered. You also have the option of restricting your residual debt insurance to the death and thus saving some insurance premiums.

Capital Lender Tip: Check exactly what form of residual debt insurance you actually need. In this way you can often achieve significant savings in insurance premiums and you really only hedge the risks that can actually be in the room. If you blindly conclude an RSV, you run the risk of double insurance!

Another important advantage is that no health check is required. If you want to take out life insurance, a medical examination will be required in most cases – at least your health status will be clarified by means of various queries by the insurer. If you have illnesses such as high blood pressure, obesity or already suffered heart attacks or strokes, this can significantly increase the cost of life insurance.

The same applies if you have survived a serious illness such as cancer in the past. All these things are not queried with a residual debt insurance.

Overview of the advantages of residual debt insurance

  • Protection of the bereaved in the event of death
  • Protection of the family if there is no income due to illness or unemployment
  • No health check necessary

Disadvantages of residual debt insurance

Disadvantages of residual debt insurance

Despite the advantages mentioned above, residual debt insurance as an insurance solution is repeatedly criticized. This has different backgrounds:

On the one hand, the way in which residual debt insurance is awarded is repeatedly criticized. As a rule, this is tied to the online credit to be granted in each case. This means that the amount of the insurance premium also results from the amount of the loan to be secured. In addition, however, there are in many cases comparatively high closing premiums for the respective credit intermediary or for the lending bank. This ensures relatively high insurance premiums, measured by the frequency with which this insurance is actually used.

Another point of criticism is how this insurance should be paid. With the residual debt insurance, you pay the full insurance premium when the loan contract is concluded. This is then added to the loan amount and paid directly by the lender to the respective insurance company. This increases your loan amount without you ever having the money in your own hands. With comprehensive residual debt insurance with a loan amount of 25,000 USD and a loan term of 10 years, an insurance premium of 3,000 – 4,000 USD can be achieved quickly. Since this has to be co-financed within the framework of the loan, this is clearly noticeable in the monthly debit, as well as in the total cost of the loan.

In addition, you should definitely check the conditions of the residual debt insurance in detail, since many insurers integrate waiting times for the benefits, so that you can not always enjoy full protection of the residual debt insurance if necessary.

Overview of disadvantages of an RSV

  • Comparatively high costs for the insurance itself
  • High closing premiums for the credit intermediary, which means that the consumer often does not even know whether this insurance is recommended to them for conviction or for financial reasons
  • Increase in the loan amount through insurance and the associated significant increase in total loan costs
  • Partly hidden deadlines and waiting times in the insurance conditions

Are there cases in which you should not waive residual debt insurance?

Are there cases in which you should not waive residual debt insurance?

There definitely is. These are briefly summarized:

  • Long-term loans of four or more years,
  • Installment loan with a very high loan amount (loans over 20,000 USD)
  • If the borrower has already received sick pay due to health problems or previous illnesses
  • If the borrower has an employment contract that is permanent, but in an industry that can threaten unemployment
  • For families with children in the household, especially if a single earner takes care of the maintenance of the entire family

Conclusion – the residual debt insurance can be an important protection – even if it is not the perfect insurance solution

There are numerous cases and situations in which residual debt insurance makes sense and is important. Nevertheless, the type of insurance of the residual debt insurance comes with some negative points that have to be considered when taking out the insurance.

Annuity Loans and the Benefits For Buyers

What is an Annuity Loan?

money

If you are flirting with the purchase of your dream property, you have to pay substantial costs and usually choose long-term financing. The usual way is through a mortgage loan. This can cover up to 80 percent of the construction and property costs. As a rule, a certain variant of the mortgage loan is taken out, namely an annuity loan. Annuity means: “The rate remains the same”, and that is the advantage of this type of loan – you know at the beginning of the financing exactly how much money is to be paid to the mortgage lender by the end of the agreed term.

The repayment increases, the interest portion decreases

The repayment increases, the interest portion decreases

The fixed interest rate on an annuity loan is variable or set at four, ten or 20 years. The constant monthly installment is made up of two components: the interest component and the repayment component. Initially, the repayment of the loan is relatively low. However, as the remaining debt shrinks with each payment, the interest portion of the installment decreases and the repayment portion increases. What is the only logical: the higher the repayment, the shorter the term. With low mortgage rates, in particular, experts, therefore, recommend repayment higher than the one percent that is often the norm.

Annuity loan: calculation example

Annuity loan: calculation example

This connection is also an argument for the annuity loan in contrast to some home savings models. A calculation example :

The basis is a financing sum of 100,000 USD and a term of 25 years. The effective interest rate for the first 15 years is 5.01 percent, the monthly charge is USD 623.33. In this annuity loan example, this results in a remaining debt of 43,011.14 USD after 15 years.

With some combination models, almost 60,000 USD remain after the same period. The reason: With the annuity loan, repayment starts immediately, with the home savings variant, the customer only pays the interest on the loan for years, while at the same time the repayment amount is accumulated through a home savings contract.

Advantages and disadvantages of an annuity loan

The advantage of the annuity loan: With a corresponding fixed interest rate, there is a constant monthly charge with precisely calculable residual debt. It is therefore ideal for financing owner-occupied residential property.

The disadvantages: After the rate lock expires, there is a risk of interest rate increases. With variable loans, there is always a risk of rising interest rates – the financial burden of the loan can increase unexpectedly. For the financing of rented Bluebeard, it is usually not the best solution because of the falling interest rate and an increasing repayment component. The reason: the rental income is in most cases constant, while the repayment expenses can increase.

Calculate follow-up financing

Calculator and money

After the fixed interest period, which is often 15 years, follow-up financing is required, since the loan amount has not yet been paid in full. In the case of an annuity loan, the subsequent monthly charge depends on the applicable interest rate. The lower it is, the better for the borrower. If the remaining debt of USD 43,011.14 from the above example is to be paid off over ten years, the rates would be around USD 430 per month at a borrowing rate of around four percent.

Note additional costs

When comparing different financing offers, many builders only consider the effective interest as calculated according to legal regulations. However, this effective interest rate does not include all credit costs. In the case of new buildings, in particular, provision interest and partial payment surcharges accrue for the time between the loan approval and the loan payment. At some banks, borrowers also have to pay fees for determining the blue value. Such costs can significantly increase the effective interest rate.

The special form of full-time loan

Just like with the classic annuity loan, the borrower pays a constant monthly rate, which is made up of the interest rate and the repayment component. However, you do not specify the annual repayment rate here, but determine the period after which you want to be debt-free. This specifies the repayment component with which the loan is repaid in full within the specified time.