So you can also find the right construction financing!

Many wish to own their own property at some point in time. Whether building yourself or buying real estate, if you do not have 100.000 euro and more at own capital funds possesses, is almost always a construction financing necessary, in order to be able to realize with the loan received from it the purchase or alternatively the building of a house or a free-hold apartment. A low interest rate is an incentive for most to take out a mortgage loan, but you should not look at the interest rate alone. aktivhyp has put together tips for you to help you find the right construction financing:

Check equity:

The first step to a solid construction financing is a cash audit. A realistic overview of income and expenses is important, so you can calculate how much money you have available for a loan each month. It is important to include all expenses in the process. With the help of a budget calculator, you can use the key data of your budget to calculate the possible rates for your real estate financing. As a rule, you should bring 10 to 20 percent of the purchase price plus the incidental acquisition costs( for land transfer tax, notary and land registry entry), but the monthly burden resulting from the mortgage loan should not exceed 40 percent of the total net income.

Negotiate with the banks:

With a construction loan, you will be tied to your bank for a longer period of time. Therefore, you should look carefully with which bank you enter into this commitment. It is important not to rely only on the bank you trust, because you can potentially lose money in the process. Here offers of the banks should be compared, a offerer comparison can open perspectives for favorable loans and strengthens additionally the own negotiating position. Search out at least three to five banks; there can be an interest rate difference of up to 0.5% between the worst and best provider. The most favorable offer you can then also present to their house bank, because there is a possibility that they will certainly accommodate you before you switch to the competition.

Compare interest rates: Effective interest or debit interest?

When stating the interest rates, banks distinguish between debit and effective interest rates. Banks are obligated to show the effective interest rates for loans, but consumers are often uncertain because there are differences between the two options. Borrowers should know the differences and they should know which interest rate is more meaningful. Debit interest rate or effective interest rate? If you want to know your burden, the borrowing rate is important – multiply the respective loan amount by the borrowing rate plus the repayment rate and divide the sum by 12 ( months), the result is your monthly burden. However, if you want to compare offers, this should be done on the basis of the effective interest rate. The effective interest rate indicates the total annual cost of taking out a loan, in it must be nominal interest rate, fixed interest period, discount, amortization rate, timing of interest and principal payments and the processing or brokerage fee. However, even the effective interest rate does not include all costs that may be incurred. For example, appraisal costs, commitment interest or account costs are not included in the calculation.

High initial repayment:

Important when choosing the repayment amount: If you want to be debt-free faster, you have to increase the repayment amount. The lower the interest rates, the higher the initial repayment should be chosen. One percent is often the usual rate, but a repayment rate of two percent is recommended, although three or four percent is better, as this allows the total term of the loan to be reduced by a few years, which in turn saves on interest costs.