For home builders, conditions were rarely as good as they are now. The interest rates for mortgage lending are at a historic low and the state also helps, in which he has expanded the Riester promotion on real estate.
As a result, real estate is currently the best seller. They are considered a safe investment. Although real estate prices have risen significantly in the recent past, there are more and more people deciding to buy their own four walls while at the same time providing for old-age provision. Construction money with a ten-year fixed interest rate can be obtained today by consumers for an average interest rate of less than 2.5 percent. Experts are certain that hardly any changes will be made in the next two years on the current level of interest rates, so that consumers can calmly plan their possible mortgage lending.
In terms of mortgage lending, the annuity loan is the classic when it comes to making the dream of home ownership come true. Find out more here.
What is an annuity?
The Latin term refers to Annus, the year. In connection with mortgage lending, this refers to the annual amount to be paid, which results from interest and repayment. In principle, an annuity is a matter of regular payments, which can also be made in one sum. But usual here are monthly installments. The peculiarity of an annuity is that the paying installment remains the same for the borrower over the entire term. However, this does not apply to interest and repayment. Here we distinguish between constant and variable.
But it does not matter which annuity is chosen, the rate does not change anything. Of interest are only the interest. In the case of a constant annuity, the interest rates remain the same over the life of the mortgage, while the portion of interest within the installment decreases the longer the repayment lasts. With every paid rate, the repayment increases.
Unlike a variable annuity, the interest rate is flexible. Whether it rises or falls, depends on the general interest rate on the financial market.
Annuity loans are the first choice for mortgage lending
The annuity loan is the most commonly chosen type of real estate financing. The mortgage loans are characterized by the always constant monthly rate, which consists of the interest and the repayment portion. As a result, borrowers get the desired security because it is already clear when signing the contract how high the monthly burden will be.
Typically, annuity loans are terminated with an annual repayment of one percent. With a loan amount of 100,000 euros, this equates to repayment of 100 euros. In addition, the interest rates, so that the rate increases accordingly. In the current low-interest phase, it makes sense to choose a higher eradication to be faster debt-free.
Of course, the lower the interest rate on the annuity loan, the slower the relationship between interest and principal will shift, which will make debt relief much longer.
Annuity loans with fixed interest
For annuity loans, the interest rate is usually not agreed for the entire term. Usually, fixed rates are usually between five and 15 years. If the market interest rate is higher after expiry of the fixed interest period, the monthly burden also increases. If it is lower, it can sink. You can hedge against rising interest rates with an annuity loan through an appropriate forward loan. Here, in low-interest phases, the follow-up financing can be secured at the best possible conditions.
Cleverly specify the fixed interest period
How long the interest rate commitment should be, should depend on an annuity loan on how the current interest rate situation. Low-interest rates can be secured against premium over a relatively long interest rate. In high-yield phases, it is advisable to do exactly the other way around and to hope through short interest rate fixation that the follow-up financing will be cheaper.
Plan follow-up financing
If the follow-up financing is not secured by a forward loan, it should be well planned. A Borrower is not automatically required to complete its follow-on financing with the same lender after expiry of the fixed interest period.
A loan comparison can be used to find a provider with better conditions. A change of provider is also always possible if the loan has already run for ten years. After expiry of this period, notice can be given without payment of a prepayment penalty.
For future builders and property buyers who want to build or buy a property, an annuity loan is fully recommended.