Building loan

What you need to know about the construction loan in construction financing

In 2013, 130 billion euros were invested in residential construction in germany. That's the equivalent per person living in germany of about 1.500 euros.

In order to know how expensive a building loan or an instant loan is, you need to know what it costs. If the question of financing a construction project arises, various factors must be compared. Not only the amount of interest on a construction loan is crucial in a comparison, but also the ancillary costs that are incurred in a construction loan or construction financing. Equally decisive in a comparison is the scope of the construction financing, in which the loan is to be repaid. A consultation is more than important with the decision making with a comparison.
Construction financing or construction loan is a decision that may be binding for up to 30 years. There is a good preparation the A and O and of course also the knowledge in the range baufinanzierung. The basic thing to say is that an unscheduled repayment on a construction loan or construction financing should not be waived in comparison. There can also be immense savings on a construction loan after a comparison, if a lot of work can be done by yourself. Thus, various types of loans are also available for construction financing or construction loan in comparison. The combined loans, for example, in conjunction with building societies.

Maintaining the standard of living despite funding

construction loan

The most important point in a construction loan or financing in comparison is the repayment rate. This is decisive for the repayment period and at the same time for the cost of the loan in general. If a quick repayment can be made, at the same time the term will also be less and the fewer years needed for financing, the lower the interest costs will also be. For example, if a construction loan of 100.000 borrowed with a classic initial repayment of one percent and a borrowing rate of 4.5 percent, then it would take 38 years to pay it off. However, if a repayment rate of three percent is selected, the borrower will be debt-free in 20 years. At the same time would also be saved thousands of euros in interest on construction financing. Therefore, the redemption rate should be set as high as possible, so that a quick debt relief can be made with the construction financing. However, the monthly burden must be within the limits of how the borrower can afford it. A construction loan or construction financing should not involve restrictions on the quality of life while it is being paid off. That is why a comparison is always important.

Prefer to choose a higher amortization

Another advantage of a higher repayment rate is that the remaining debt on a construction loan is also lower. Especially at times of low interest rates, a higher repayment should be made on construction financing, because when the remaining debt to be paid, the interest rate level may have increased, which would also bring a higher rate. Therefore, it is very important to consider the repayment and calculate the optimal amount of repayment before construction financing or construction loan. Especially for builders who start with a construction financing at a later age, the consideration of the repayment is important in a construction financing in comparison. At retirement age, much less money is available each month for construction financing than now. It must be remembered that the construction loan or. To structure the construction financing in such a way that repayment is completed before the start of the annuity loan.
If small repayment rates are selected for a construction loan, the term of the construction loan is automatically extended. If the interest rates for construction financing are currently very low, which can be determined with a comparison, a fixed interest rate of at least 15 years should be negotiated for a construction financing. The repayment rate for a construction loan in comparison in itself should be above one percent. With this one percent usually begins the repayment from the building loan resp. Construction financing. If the borrower chooses a higher rate, for example, 2 percent, then the monthly installments increase, but the construction loan or construction financing is quickly settled. The repayment rate or even the total monthly installment of the construction financing should be chosen in a comparison, however, so that the personal and financial circumstances are not exceeded. The own standard of living must be able to be held also with a construction financing in the comparison. When making a comparison, it is also important to keep in mind that due to the long terms involved in a construction loan, you should expect to incur unforeseen expenses. It only needs to be a vehicle, which is urgently needed for professional reasons. A reserve must be created for such cases, so that the repayment rates can be calculated on the basis of this comparison.

Always keep an eye on the funding

repay building loan

In the case of a construction loan or financing in general, it is feasible to change the repayment amounts during the term of the loan. It always starts at one percent of the loan amount. During the repayment from the building loan resp. Construction financing, the borrower can raise the repayment rate up to 10 percent, depending on the financial situation. Here, however, the comparison of the lenders is important, because some offer an unlimited number of interest rate changes, others again a limited number and others even require a fee for it. Those who know in the course of their construction financing that, for example, a higher income is to be expected, should therefore decide by comparison for a provider who does not charge fees for a change in the interest rate on a construction financing. In this case, the conditions could be different for a construction financing, but because of this, personal needs and ideas should be taken into account when making a comparison. This is the only way to ensure a perfect balance between repayment modalities and one's personal desires in a financing scheme.

However, looking at interest rates should not only be done during the construction financing process itself, but also during the follow-up financing process that occurs when a construction loan or. Of a construction financing is always pending. Many banks offer here the possibility that the same repayment installments can be made in a construction financing, as it was the case in the fixed-interest period. It is a condition adjustment that is carried out by default. The borrower of the construction financing should look again at a comparison of interest rates and financing here. In the meantime, personal and financial circumstances may have changed – positively or negatively. So, the borrower must be given the option to change the terms on their construction financing after these new circumstances are met. And this can be done. If you start early with construction financing and take out a construction loan, you may have obtained a better paying job in the meantime. If the borrower of the construction loan is in a position to provide follow-up financing to a much greater extent, then he should do so. The higher the installments paid, the faster the financing is completed.
No matter which financial provider you choose for a construction loan or for a construction financing in comparison, a comparison is indispensable. Interest rates must always be kept in mind, also during the term of the loan and especially when negotiating the financing after the fixed interest period. With a construction financing many people fulfill the dream of their own four walls. Started at a very early age with construction financing, a family can be created in the property built or purchased. Sometime later, parents may no longer be able to support themselves on their own and a generational home may be created. These and many other possible factors must be urgently considered when preparing for construction financing and selecting a construction loan.