The ongoing financial crisis and uncertainty in the investment markets are one reason why more and more people are investing in “concrete gold”. The absolutely low interest rates for building money also cause people to buy property.
But a few basic things should be considered right now so that the financing is on a sound long-term basis: The purchase price of the property should be oriented so that the size matches the available equity and monthly income. As a rule of thumb, 10 to 20 percent of the purchase price and the incidental acquisition costs (5-10 percent) of own funds should be available.
The tax advantage is often placed in the foreground and financed to a healthy degree. In the event of a loss of rent or an emergency sale, liquidity problems or remaining debts are inevitable.
In any case, the cheapest conditions for building money can only be obtained on the “first-rate part” of a land charge. This “real loan” corresponds to up to 60% of the mortgage lending value (resale value considered by the bank to be valuable). With a loan amount up to 80% of the mortgage lending value, small premiums are usually made, with amounts exceeding this, higher risk premiums are made. This makes financing more expensive.
When calculating the serviceability requirement, the calculation should be realistic and not too narrow. Rising ancillary costs or already foreseeable changes in income (eg desire to have children, no shift work) must be taken into account. After comparing all income and fixed expenses, depending on the number of people living in the household, a sufficient amount should be left to make a living so that the financing is sustainable.
With a long-term fixed interest rate you can secure the currently extremely low mortgage rates and keep the monthly charge manageable throughout the entire term. However, due to the low interest rate level, attention must be paid to an adequate repayment rate. With a repayment of 1 percent per year, the loan would currently run for 50 years. In order for the financing to be completed within a realistic period of 25 or 30 years, a repayment rate of around 3 percent is required. Otherwise, the remaining debt may have to be financed later with high interest.
One should compare the offers of the financial institutions well and pay attention to the surcharges mentioned. A manageable partial amount can also only be fixed for 10 or 15 years, as this is a little cheaper. One should inquire about the possibility of special repayment or an increase in repayment even during fixed interest rates. This can significantly reduce the overall interest burden and thus the term. With the repayment calculator from Saversbond Finance different interest rate models including interest and repayment rate, rate, term, remaining debt after interest expiration etc. can be calculated.
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