Those who decide to build a house in the near future and take out a construction loan for this purpose, can still enjoy favorable construction interest rates. But the level rises. Experts expect strong increases in the interest burden soon!
Builders still benefit from favorable construction loans. (photo: rhombur / istockphoto.Com)
Times could not be better to buy property or build a new home. This is despite the fact that construction interest rates have risen slightly in recent weeks. After all, a construction loan is still available for an average interest rate of 3.9 percent. Compared to the construction interest rates of the past three decades, with an average of about seven percent interest, this is very favorable.
Construction financing – last minute for cheap house construction
"We still have historically very favorable interest rates," explained financial expert prof. Klaus fleischer of munich university of applied sciences told handelsblatt. "However, this window of opportunity is now closing." Just last week, the european central bank had raised the key interest rate to prevent inflation from rising. Further adjustment steps in this regard are expected by professionals. For builders, however, this also means that it is time to decide to build a house in order to secure the favorable interest rates for the long term.
Construction financing – the annuity loan
Among the classic financing in the field of construction loans is the annuity loan. He is mostly subject to a commitment over a period of ten years. The advantage for builders is the constant monthly that borrowers must make. It also allows you to keep a good overview of costs in the long term. It is with these repayments, moreover, both the credit and the interest are redeemed. However, the offers for this form of loan are scarce on the market. Unfortunately, this financing product is also more cost-intensive than financial products with a short-term interest rate commitment.
Construction financing – long-term fixed interest rate
Prof. Fleischer explains in the handelsblatt: "if you want to be on the safe side, you should take a contract with a 15- or 20-year fixed interest rate". Builders have the option to terminate the contract after only ten years. The bank may not then demand an early repayment penalty. Builders can then switch to more favorable conditions without losses, if such are offered.
Construction financing – do not choose repayment rates too low
As a basic recommendation, experts give the tip not to set annual repayments too low. The annual repayment rate should not be less than one percent of the loan amount. Recommended by the experts two percent. Expert klaus fleischer additionally recommends that building owners secure an annual special right of termination of five or ten percent and also fix this in writing in the contract. This allows for an additional unscheduled repayment without incurring further costs.