How does it make more sense to buy a house: with or without equity?? Mortgage lenders and consumer advocates advise homebuyers to keep between 20 and 30 percent of their equity up front. However, more and more homeowners prefer full financing. In the meantime, the entire financing is granted even including the incidental acquisition costs. Is there a "royal road?
Tempting: buying a house or apartment without equity capital
Why wait for life insurance to bear fruit? If you have found the property of your dreams, you may want to act quickly before others do. Banks and construction financiers have long insisted on a minimum of 20 percent equity coverage as the basis for financing. Meanwhile, they provide real estate financing even without equity. If the loan amount granted corresponds to the purchase price of the property or, in the case of a house, to the land, development and construction costs, this is referred to as net financing.
If the loan also includes ancillary acquisition costs such as notary and transfer fees as well as the broker's commission, full financing is referred to as gross financing. Full financing is granted only to borrowers with solid, secure and sustainable income. Banks and construction financiers thereby secure the repayment installments due. The creditworthiness of the loan applicant must also be impeccable. The chance of obtaining financing without equity also depends on the object of purchase. The property financed should not be dilapidated or in poor or undesirable locations. Otherwise, the bank has no chance of reselling it if payments are not made.
When is the full financing of the property worthwhile?
Applicants with good, solid incomes are offered low-interest full loans in the current low-interest phase. However, some banks demand risk premiums for this purpose. This applies in particular to gross financing, where the land transfer tax, notary and estate agent costs are also financed. Anyone planning financing should therefore determine the gross costs, including ancillary acquisition costs, at an early stage and compare loans. How long is the loan term?? How much are the required interest and the estimated monthly repayment rates?
Is there a fixed-interest period and how long does it last?? Special repayments, i.E. The possibility of unscheduled repayment through additional payments, are helpful. Unscheduled repayments significantly reduce the loan amount, and in some cases also the loan term. However, they must be contractually agreed from the outset. Many credit institutions protect themselves against premature shortening of the loan term through special payments by means of so-called early repayment penalties. If you plan to shorten the term of the loan by making larger one-time payments, whether from maturing home savings contracts or an inheritance, you should therefore insist on a loan with no prepayment penalty. Online repayment calculators provide an overview of expected interest and repayment costs for financing.
For whom is it worthwhile to inject equity capital??
Freelancers and the self-employed should think twice before planning to buy a home or apartment without equity. If you are creditworthy at all, you will often be offered worse conditions. If builders with a fixed employment relationship are offered construction financing starting at 1.0 percent effective annual interest, self-employed people usually pay more than 2 percent more for the same loan. The higher the equity ratio, the safer and lower the interest rate the loan offers are for freelancers buying a house. If you add between 30 and 40 percent equity, you save at least 1 percent interest on the construction loan. The interest costs and the term until full repayment are reduced enormously. The latter also applies, of course, to applicants on salary.
Without equity, many self-employed people can't get a construction loan at all, others only with short terms and extremely high repayment rates. In return, freelancers are usually granted generous special repayment options. Always, however, the credit approval to self-employed persons is associated with high requirements. In addition to the positive schufa information, a business activity of at least 2 years must often be presented, often also a business plan and positive balance sheets. Many banks also expect the transfer of collateral such as life insurance policies, motor vehicle bonds or the registration of a land charge on existing residential property.
Construction financing with or without equity capital?
Which form of financing is more favorable when buying a house can be calculated online already in the planning phase. The "muscle mortgage", the planned personal contribution to the construction of the house, can also be included in the calculation. Online apartment search portals offer sample calculators, as do banks, financial service providers and trade journals.