A property purchase and the associated building loan are the most important financial decisions in your life for you. Therefore, this step should be carefully considered and planned. Find out what options there are for your building loan. There are 4 financing models in Germany to carry out a building loan. Read about the differences, advantages and disadvantages of these construction loan models.
The classic building loan with a bank
With a classic home loan with a bank, there are three common models of home finance.
- Final loan
- Mortgage loans
With all three types of building loan, you should have a good Schufa and good creditworthiness as a prerequisite. The interest on your building loan or mortgage is usually set at ten years. Then the interest is recalculated. Interest and their terms can be agreed between 5 and 20 years. In exceptional cases, you get a fixed interest rate even up to 25 years.
The home loan
A construction loan realization with a home loan alone requires approx. 40 to 50 percent equity and a waiting period for the allocation. This is avoided with a final loan in combination with a building loan contract. You serve the interest for the final loan, as well as the savings of your building society contracts. The repayment-free loan will be replaced by your building society contracts after the allocation. The home loan and the obviously low interest rates do not hide the fact that this can be very expensive under certain circumstances. Financing with a home loan savings contract is usually the most expensive way to finance a property! But there are also a lot of arguments in favor of saving.
Building loan with life insurance
A building loan with a life insurance policy is no longer in use after the 2001 stock market crash and is very risky. The insurance grants you a building loan. The condition: you take out life insurance as repayment for your building loan. At the end of the term, the capital in life insurance should be able to pay your building loan. If this is not the case at the end, you have a problem. Due to the high interest on the loan and the non-guaranteed expiry amount from life insurance (unit-linked LV), this is definitely not recommended. NO GO!
Building loan with hire purchase
Hire purchase as a building loan of the extra class. You need max. 10 percent equity for your building loan. You do not apply for a loan, credit or mortgage. You have no debts. An auction or a credit termination is excluded. Your terms are fixed over the entire period of funding (25 years). You get financing even if the bank refuses the loan! The safest construction loan financing you can get in Germany!
Building loan types conclusion
None of the above-mentioned building loan models alone is an optimal solution for everyone. With one exception, that building loans are available for hire purchase. It combines exceptional security with a very low interest rate. But even if at some point you can no longer service your building loan, this financing does not end in financial fiasco!