They influence the decision for or against a mortgage lender, although current interest rates on loans are generally still the most important factor in finding credit. In this way, you secure the favorable conditions of today against a low date premium, which is already included in the interest rate shown in our comparison. Construction interest is the interest rate at which you take out a mortgage loan. This determines the total cost of the loan. If you are interested in taking out a loan or want to negotiate the extension of the term of a loan, you are regularly interested in the costs that should be used as the current interest rate for the loan.
Free up to date interest rate comparison
Interest rates will remain very low and capital will remain strong in 2018, as our real estate financing calculator shows in direct comparison. The current interest rate comparison is always worthwhile, because according to the endowment test (11/2017), only small interest rate differentials quickly add up to 5-digit rates. Due to the high loan amounts and the long-term nature, an interest rate of 0.5% over a term of 15 years results in an additional burden of USD 20,000 for a loan of USD 200,000.
Development in March 2018: Current comparison of interest rates, interest rates moved within this corridor in the month of February: The editors expect short-term stable property rates, but moderate interest rate increases. The average return on construction loans was 1.13% for a 5-year and 1.44% for a 10-year maturity at the beginning of Nov compared to 1.11% and 1.35% on 1 Dec, respectively.
The market trend points to a moderate increase in interest rates. The low interest rate level of September 2016 is thus already a historical level and is likely to move into the other, northern direction in the future, as Fig. 1 shows. “The lowest interest payments go to building owners and home buyers who receive their loans through a low-cost broker.
In addition, they represent the majority of the top ten single loan providers with a fixed interest rate of 10, 15 and 20 years. “The development of construction interest is shown in Fig. 1, the decline in interest rates since 2008 is clearly visible.
Loan with a lower interest rate has a longer term
As a safety buffer, in principle ten to 20 percent of the production costs for the financing should be added to the total construction costs. Use our interest calculator! For developers, another selection criterion is the choice of financing bank, the commitment interest. However, the loan itself has already been made available by the house bank. Second
Mathematically an objective fact, it is difficult to explain why a loan with a lower interest rate has a longer term with the same repayment. However, the client should not look for the highest possible interest, but exploit the low interest rate for an increased repayment share. By increasing the repayment from one percentage point to two percentage points per year and reducing the remaining debt, the loan term and thus the interest savings can be reduced by up to ten years over the entire term.
While fixed interest rates of five years have often been fixed at a time of high equity and hence high mortgage interest rates, the current situation calls for a fixed interest rate of at least ten years for a construction loan. Interest rates are lower, the shorter the maturities are. It is therefore advisable to obtain a fixed interest rate over a longer time horizon, ideally over the entire term of the loan.
Special loans that not all banks provide to their clients.
The advantages of the long-term fixed interest period also apply to the area of early loan repayment. The law stipulates that loans with a term of more than ten years can be terminated by the borrower at the end of the age of ten without being entitled to an early repayment fee. Whether he does not shorten the loan repayment period by partial repayment or significantly reduces the monthly installment through inheritance or donations, nobody knows about the conclusion of the contract.
In addition, future builders can determine the best interest rate by varying the maturity in advance – all conveniently from the comfort of their own home with just a few clicks through our mortgage calculator. A building owner or a real estate purchaser finances the construction or acquisition of a property through construction costs. Most builders therefore use one of the many real estate financing offers.
With the private financing of real estate an institute creates a long-term customer loyalty, by which further business can be achieved. Especially with the currently low interest on loans, many private individuals take the opportunity to establish a secure investment and provision by acquiring or constructing real estate. Why a mortgage? Mortgage lending or real estate financing, as this type of loan is also referred to, are special loans that not all banks provide to their clients.
Real estate loan and a building loan loan
The bank employee also informs the client about the equity amount, which ideally amounts to 20% to 30% of the total amount. The customer should trade here about the interest of the competition and refer to it conditionally. In many cases it is recommended to postpone about five to six months’ wages as a safety deposit and to use the other savings to finance the construction.
When determining the amount of the loan, the borrower must take into account that the acquisition or construction of a property or house is accompanied by various incidental acquisition costs that are co-financed. In real estate financing, a distinction is essentially made between a real estate loan and a building loan loan.
Because the financing of construction projects is usually long loan installments, banks attach great importance to collateralisation of the loan. For the financing of real estate an allocation of wages and salaries, as with a conventional installment loan, is not enough. Rather, it is secured by a land register entry, in which the house bank usually urges on a first-ranking land charges.
The land charges are recorded in the same way as the loan amount as land charges in the cadastre. If the borrower is no longer able to meet his payment obligations, the registered institute has the right to use the object to be financed and, for example, to initiate a foreclosure. This encourages many individuals to create a real estate loan to build or buy a home or apartment.
But the current low-interest phase will not last forever. That’s why, as part of serious mortgage advice, banks insist that borrowers do not prefer too short a fixed rate on their mortgages. Subsequent to the expiration of a fixed interest period, follow-up financing is provided in which the interest rate for mortgage lending is renegotiated.