Rapid repayment of a real estate loan pays off

The purchase of a property still stands under a good star in terms of low-interest real estate loans. Loans for real estate are still quite affordable. However, experts believe that the tide may turn and interest rates for real estate loans could rise again. Click here to find out how you can secure better conditions with a quick repayment loan.

Quick repayment loans – how to protect yourself from rising interest rates

A quick repayment loan is a conventional annuity loan that is repaid within a comparatively short period of time. A quick repayment loan is also often referred to as a full repayment loan. The great advantage of this loan is that the interest rate is fixed for the entire term of the loan. There is no provision for follow-up financing. When real estate buyers opt for rapid repayment, they have a high degree of planning security. You determine the timing of the financing yourself. Average interest rates for real estate loans with a fixed interest rate of ten years have risen again since may 2015 and are currently around 1.76 percent. Interest rates of 1.76 percent for a real estate loan are still favorable, but no one can say how long this level will be maintained.

As a real estate buyer, you can protect yourself from rising interest rates by taking out a quick repayment loan now. Such a loan is characterized by terms of between 10 and 30 years, a fixed interest rate for the entire term and the complete repayment of the loan within the term. This eliminates the need for follow-up financing. Real estate buyers can therefore secure today's favorable interest rates for a long period of time with a quick repayment loan and do not have to worry about rising interest rates for real estate loans. In addition, many banks offer an interest rate discount of up to one percent for rapid repayment loans. This finding was made by stiftung warentest as part of its random tests for the magazine "test" (08/2015). For real estate buyers, a quick payoff loan is worthwhile in several respects.

Rapid repayment – high repayment rates

Rapid repayment of a real estate loan - full repayment loan

Compared to conventional installment loans, real estate loans are characterized by high loan amounts and long terms. While a difference in interest rates of only a few percentage points has little effect on small loans with short terms, a few percentage points can ultimately result in a difference of several thousand euros for real estate loans. A comparison of the various loan offers is worthwhile here. As attractive as quick repayment loans are, they are not necessarily suitable for every real estate buyer. These loans are not only associated with relatively favorable interest rates, but also with high repayment rates. In order to be able to repay a real estate loan within a short term, the monthly installment must be set high. For the borrower, this can be a major burden.

Here it is important to weigh up whether the high monthly burden fits into the budget or not. Rapid repayment loans are particularly recommended for prospective borrowers with a high monthly income. It is important to remember that if you can no longer afford the loan installment, your home ownership is in danger. And if you ultimately find that the monthly repayment rate was set too high and want to reduce it, this entails additional costs. The interest rate discount may be rendered invalid by later adjustments. Adjustments are often associated with compensation for the bank or the borrower is offered a new contract with new terms and conditions. The fixed interest rate is then also no longer given. This means that there is a risk that the remaining amount will have to be rescheduled with the help of a more expensive loan.

If you want to take advantage of a quick repayment loan, you should also have sufficient equity capital so that only a manageable portion of the purchase sum has to be financed by a loan.

Real estate loans – credit comparison of offers

If you want to finance a property with a loan, you should compare the offers on the market. In the ideal case thereby not only fast amortization loans are included in the comparison. Other real estate loans with favorable interest rates can also be a real alternative to a fully amortized loan. Quick repayment loans are comparatively inflexible and allow the borrower only few or no adjustments.

Many banks exclude not only changes in the installment amount, but also special repayments with a quick repayment loan. Real estate loans with short terms and high repayment rates are suitable for people with high incomes for whom high monthly payments are not a problem.

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