Real Estate: What can go wrong with mortgage lending

In the real estate financing customers are often incomplete advice, Stiftung Warentest has found. The conclusion of a construction contract often entails risks. The most common mistakes and how to avoid them.

Schlechter advice is expensive. What bank or building society representatives say is rarely actually wrong, but often dangerous incomplete. Who can be persuaded to equity poor or even -free finance with 1 percent in early repayment, takes a lot of luck to building or to really end up paying -Purchase.

Other risks do the conclusion of a construction contract. If important services such as the development of the site are missing and no money is there, the dream may have burst their own home before construction has even begun. The most common mistakes in mortgage lending and how to avoid them:

Optimism own contribution
Another risk when entering into construction contracts: The worker of the client itself is much planned too optimistic. If the builder does not or does not provide the intended house services on time, supplementary orders and additional credit be necessary. Especially an already scarce funding then quickly gets to slide.

Risk remaining debt

Especially with the currently low-interest financing with insufficient early repayment is highly risky. At the expiry of the fixed interest rate for five occasionally, but usually ten or 15 years a new loan must be found to compensate for the remaining debt. If interest rates at this time are higher than now, the monthly rate can increase dramatically.

Example: With a 100,000 euro loan with 1 percent in early repayment and 4.5 percent interest monthly payments of 458 euros to be paid to the bank. After ten years, the remaining debt is around 87,400 euros. If interest rates at this time are at 6.5 percent, the monthly increases to more than 625 euros. If interest rates even are increased to 7.5 percent, even 708 euros are payable monthly on the debt restructuring.

Costs under control

Particular caution is called for in extras at the conclusion of the loan agreement. Some banks charge as estimated costs. Significant differences also exist in commitment interest. Some banks charge as early as the second month after the loan commitment an interest rate of 0.25 percent if the loan is not paid.
At other banks interest-free grace period of six and sometimes even twelve months there. Such costs are not taken into account when specifying the effective yield. Nevertheless, the loan will be considerably more expensive. It is the rule of thumb: Charges amounting to 1 percent of the loan amount increase the effective interest rate at ten years fixed interest rate by 0.15 percentage points.

Computing tricks in building society offers

Worthless and misleading most interest data for building societies instant financings. Example W├╝stenrot: The ticket campaigned in December with 60,000 euros in emergency funding with an effective interest rate of 5.06 percent for advance loans and 3.37 percent for housing loans after the 14-year savings period.

The financial test review concluded: Taking into account all costs of the effective interest rate of the combined loan at 5.73 percent. Cheap banks offered similar loans at the same time for more than one percentage point lower interest rate. In other words: For a monthly rate of 390 euros, the bank loan is repaid with 4.73 percent effective interest rate after 19.5 years. At W├╝stenrot the 390 euro rate payable 22.5 years long. The bank customer is at the end by just over 14,000 euros at an advantage.

Giant loss insurance financing

Even greater losses threaten when financed with capital life insurance. As such deals work: The future homebuyers includes 10 years before buying a life insurance policy. For payment of the purchase price, he gets redemption-free loans. At the end of the term of the capital life insurance contract, the payment is used to pay off the loan.
The financial test has compared such funding with conventional bank loans with a savings plan for the accumulation phase and construction loan on the accumulation phase after the missing money. Result: Depending on the loan interest rate, which will be payable on the purchase, the bank customer front is at a purchase price of 150,000 euros at the end of the financing to 45,000 to 97,000 euros.

Have the construction or purchase contract by independent experts, such as a consumer organization, the builders Protection Association or the Association of Private builders.

additional costs

Schedule the accumulating during contract utilities. They make up 5 to 12 percent of the purchase price, as a rule. Usually, you have to take as a builder or buyer’s account of the notary and often pay a commission fee. In addition, there is still real estate transfer tax of usually 3.5 percent of the purchase price and smaller items such as fees for land registration. As a builder, you still need to schedule additional cost. Particularly common the development of the site and the establishment of the construction site are to be paid additionally to the actual construction costs.
management costs

Do not forget that in addition to mortgage payments incurred operating costs. Ask the seller to last operating expense reports. Calculate new buildings with a month 2 to 3 euros per square meter.

1 percent repayment on the loan is not enough in the current low-interest rates. You should pay off at least 2 percent or degrade the remaining debt with unscheduled faster. Make sure that you can pay off the loans until retirement.

financing plan

Let yourself up a complete financial plan until the full debt relief for each financing offer.

fixed interest rate

Secure the currently low-interest rates in the long term. Loans with 15 or 20 years fixed interest rates are barely more expensive than loans with 10 years fixed interest rate.
rate hike

Let yourself reckon how your monthly payment will increase when interest rates rise to 7 to 8 percent after the first fixed interest rate.

building loan financing

If you want to fund right away, it’s not worth it mostly, but still, conclude a savings agreement. The combination with a loan for pre-financing of the savings is too expensive in general. If you are still obtain building savings: Insist that the building society called writing the overall effective interest including savings premiums and contract fees.

Endowment policy

Complete any endowment policy, if you build now or later, or want to buy a house. This is always much more expensive than a conventional financing for owner-occupied properties.