What is not said to be good for one’s own four walls? A property of one’s own is regarded as retirement provision that can be used at the present time, as a basic investment for building assets, as a crisis-proof intrinsic value and last but not least as a guarantor for a high quality of life t especially for families.
For most buyers of a home, the path leads into the living room through the offices of the house bank. Without a loan, a property can seldom be financed. Since a residential real estate also entails an often decades-long loan commitment, the realization of the home ownership project should be carried out with the utmost care. Funding should be soundly based and consistent with wider private finance planning.
The basis should be an equity share of 20 percent, whereby the acquisition-related costs should of course also be financed by one’s own pocket. The higher the equity ratio, the lower the burden of the loan consequently a lower rate is payable or a shorter repayment term is acceptable.
In any case, any support from the state should be claimed. For example, the state-owned Intra (Reconstruction Loan Corporation) is offering a favorable loan as part of its residential property development program, which can finance up to thirty percent of the object costs (maximum 100k). The loan is interest-free, repayable within the first five years and can be extended to up to 35 years. For this purpose, it is possible to have the loan subordinated to the land register at no extra charge. For the house bank, the Intrasavings loan therefore represents equity in terms of the default risk, which significantly improves the bargaining position vis-à-vis the bank – after all, it must cover the remaining 50 percent of the purchase price.
The necessary mortgage should be as favorable as possible who can, waits for a low-interest phase. If there is no special relationship with the principal bank, a comparison of the terms and conditions of different credit institutions should always be made.
A controversial point in mortgage financing is always the question of a fixed interest rate. This guarantees the borrower that the interest rate remains constant for a certain period of time or the entire repayment term. The advantage is a higher degree of safety with regard to the expected future loads. This good, of course, is not completely free; the monthly rate of a fixed-rate loan is higher.
A compromise between risk minimization and cost awareness can be a so-called interest cap. Here, an interest rate above the market interest rate prevailing at the time of the acquisition is fixed above which the lending rate does not exceed. A possible interest rate would be a level at which the proper delivery of the mortgage could be in danger. Especially in early stages of the repayment period, such a hedge is recommended, as interest rate increases here are particularly strong on the ongoing charges.
The combination of equity, Intrasavings loan and mortgage should be suitable as a successful construction of a solid real estate financing. Especially if the mortgage is taken up at an opportune time, the dream of one’s own four walls can be realized on modest terms.