The credit comparison calculator for real estate is very easy to use. Only a few entries are needed to find the cheapest loan. But next to the interest rate, a few other factors should play a role. Who takes these four tips into account, does not go wrong. We introduce a good comparison calculator and give valuable additional knowledge.
The credit comparison calculator for real estate understandably explained
Only a few details are needed to find the cheapest loan for mortgage lending, namely
- the loan amount,
- the loan,
- the period,
- the eradication,
- the place of residence.
Should it be an apartment, a family house or a villa? The higher the amount, the cheaper the terms are.
The amount of the loan plays an important role for several reasons. First of all, it is of course important for the later loan application. Not all banks lend even at low sums mortgage-backed loans. Because of the fees for the entry of such a mortgage worth the anyway only from about 30,000, – €. Many banks even offer real estate loans only starting from a loan amount of 50,000, – Euro. For smaller amounts there are special offers such as the housing loan of Metabank, which manage without entry of a mortgage, and which are still cheaper than a classic installment loan.
Residential credit, mortgage and mortgage Colloquially mortgage and mortgage are often set equal. Both will also enter in the land register and guarantee the creditor the preferred access to a property. In the case of a foreclosure, he first receives the revenue, only when the debts are repaid other creditors or the owner receive money. The entry in the land register ensures that the debtor can not sell the house without the creditor’s knowledge or takes out a loan from different banks without them knowing each other. But it also costs money, so for smaller sums special housing loans are offered. Prerequisite for this is the possession of a property, an entry in the land register is not. Hardly used mortgage loans. A mortgage is always tied to a specific loan. A mortgage, on the other hand, can later be used for a new loan as long as it is taken up by the same bank and the residual debt of the old loan and the new debt do not exceed the total value entered in the land register. Anyone who has already paid 50,000 euros off a loan can borrow a new loan of up to 50,000 euros and cover them with the old mortgage, for example, to finance renovation work.
The height sometimes plays a role for another reason. Especially with real estate loans, high sums are often cheaper than low ones. Because the processing cost for a loan over 600,000, – is not three times as large as that for a more than 200,000, – €. However, because one-off processing fees are not allowed, banks offer lower interest rates for higher loan amounts.
From 200,000, – € loan amount, the interest rates at Metabank are particularly favorable.
However, the favorable interest rates only apply if the equity ratio is at least 40 percent – or vice versa, a maximum of 60 percent of the property value may be mortgaged. If you buy a house worth 300,000 euros, you can borrow a maximum of 180,000 euros to get the cheapest interest rate. The remaining 120,000 euros and the costs for brokers must be paid out of equity.
Higher loans of up to 100 percent of the construction sum are possible, but then rise the interest rates. Therefore, when choosing a property, borrowers should keep in mind that a more expensive home means not only higher costs, but also more interest and possibly a higher interest rate.
Debit interest and annual percentage rate The loan comparison calculator for real estate puts the annual percentage rate of charge in the center of the comparison. This also includes other costs such as fees and mandatory insurance. Because termination fees are no longer allowed in Germany, the main difference is usually in compound interest. Because the lending rates are often calculated monthly. They then amount to one twelfth of the annual borrowing rate per month. However, compound interest accrues, because from the second month interest on the interest due. It does not matter whether the interest actually increases the debt or be repaid immediately by the debtor. After all, he could have repaid more without monthly interest calculation, so that he paid through the process more than a yearly calculated interest. The annual percentage rate is therefore almost always higher than the borrowing rate, in the best case, both are the same.
In addition, interest rate fixation plays a major role in the level of interest rates. Since interest rates are currently very low, a long interest rate almost always means a higher interest rate. Because then the bank does not benefit from possible interest rate increases. In the comparison calculator, the fixed interest rate is referred to as the “repayment term”.
However, this is somewhat ambiguous because the loan is usually not paid off at the end of the fixed interest rate. As a rule, the bank offers a new interest rate after expiration of the bond at the then customary conditions (see also Tip 3: Choosing fixed interest rates correctly ).
The actual maturity until complete repayment depends above all on the repayment installment. The loan calculator offers two options here:
- The indication of a percentage.
- Full repayment during interest rate fixation.
In the first case, at least a certain percentage of the total amount is repaid annually, for example 5.0 percent. With a total debt of 200,000, – € this means a repayment of 10,000, – € a year, that is something more than 830, – € per month. The monthly installment is the repayment plus interest. Because the interest is always calculated on the remaining debt, the monthly interest charge decreases and thereby the repayment increases, so that at the end of the term even more than 10,000, – € were redeemed annually. The level of debt remaining after the interest rate has expired is displayed by the loan comparison calculator for real estate in the “residual debt” category.
With the option “full”, the rate is calculated so that the loan is paid off at the end of the fixed interest period. So if you choose a term of ten years and the option “full”, you will not have any debts after these ten years.
Not only the savings banks, but also most cooperative banks are regionally organized. Therefore, the credit conditions differ regionally.
After all, the place plays a big role. This is partly due to the regional organization of many banks and almost all savings banks. The Hamburger Sparkasse and the Sparkasse Mainfranken are each independent organizations, even the Kölner Stadtsparkasse and the Kölner Kreissparkasse are different institutes. Most cooperative banks such as Volksbanks, Raiffeisen banks, Sparda and PSD banks are regionally organized. Accordingly, the interest rate of a construction loan of Sparda Bank Nuremberg differs from one of Sparda Bank Berlin. Especially in Franconia there are still regional private banks such as the Princely Castell’sche Bank, the Schilling Bank or the Max Flessa Bank, which also offer loans on different terms.
Especially in Lower Franconia, like here in Würzburg, there are still numerous regional banks. Almost everywhere, regional savings banks and cooperative banks are active. With a reason for different rates of interest.
In addition, some large banks also offer regionally different interest rates. In doing so, they are responding in particular to the differing levels of competition from regional banks. In addition, loans in growth regions are often considered safer. Because the risk is lower, that not enough money is redeemed at a forced auction to pay the remaining debt.
Interest is not everything: 3 important tips
At the heart of the credit comparison calculator for real estate is the interest rate, more precisely the annual percentage rate. But that alone is not everything. Borrowers should also pay attention to these points.
Arrange special payments
It’s a simple calculation. Those who choose the lowest possible eradication rate of 1.0 percent a year must pay for 100 years before being debt free. Although the amortization slightly increases, as the interest rates sink by the lower residual debt, still after 20 years not even a quarter is paid off.
The first option is, of course, a higher eradication, but not everyone can afford it. Then special payments are indispensable. For all others, they are at least useful, because they save a lot of money. Every early repaid Euro saves interest and compound interest.
Unlike installment loans, real estate loans can not be terminated without further notice. Therefore, contractual arrangements are particularly important here.
Real estate loans terminate In contrast to installment loans, real estate loans secured by mortgages can only be terminated under precisely defined conditions. The first is the expiry of fixed interest. Typically, real estate loans then extend to a new interest rate. But the borrower does not have to accept this, he can give notice of termination and take out a new loan with one month’s notice. A prepayment penalty may not be charged by the bank. After a period of ten years, the credit day can be terminated at any time with six months’ notice, even without the interest being tied up.
Apart from that, a premature repayment is only possible under special conditions, for example, if the house was sold or a renovation is necessary, but the bank does not want to finance. However, the bank can demand money for these extraordinary terminations.
Allow rate changes
Rate changes also help repay a loan faster and save interest. If you have just built and possibly also had children, money is scarce. But maybe soon there will be a salary increase. Or the children get bigger and you can extend the working time again.
Remaining debt for a loan of 100,000 euros at 1.73 percent interest and an annual rate of 200.00 (blue), 300.00 (black) and 400.00 euros (gray).
Then it is good if the rates can be increased. Special repayments are often only allowed once or twice a year. Until then, the money is on bad interest rate money accounts – or it will be issued immediately. Better are higher rates. At least two rate changes should therefore be possible.
Choosing fixed interest rates correctly
Interest rates are low, the idea of a long interest rate is obvious. If interest rates go up again, you still have the low interest rates. However, the banks also know that interest rates could pick up again.
The interest rates are currently low, but that does not always have to stay that way.
Therefore, they protect themselves by lending money themselves in the long term, for example, via long-term bonds or time deposits. But these are more expensive, which means that a long interest rate currently always costs significantly more than a short. One can even assume that the surcharge is greater than the expectations about the interest rate development justify. Even banks like to play it safe.
Interest rate for a real estate loan over 100,000, – € with a mortgage of 60 percent.
So what is the best choice? Prefer to choose a long fixed interest rate and pay more or a short and carry the risk that interest rates rise? The answer depends on the type. Borrowers should ask:
- How important is planning security for me?
- Can I afford a higher interest rate?
- Maybe I can pay more and pay off the loan within a short term?
If planning security is very important, you should opt for a long-term interest rate commitment. However, not all banks offer 20 years, often 15 years are the maximum period. In addition, interest rates rise significantly for maturities of more than ten years. That’s because planning over such long periods of time is difficult. It’s also hard to find investors who lock up over 15 or 20 years to hedge the loans.
Borrowers should also remember that a lower interest rate means more repayment. That in turn lowers interest rates. A shorter rate fix can often be worthwhile.
For example: Two home buyers take out a loan of 100,000, – €. You pay annually 6.000, – Euro in interest and repayment. For the sake of simplicity, we assume an annual interest calculation and an annual repayment at the end of the year. A monthly calculation would not change the overall result significantly.
The first buyer chooses a fixed rate of 10 years with an interest rate of 1.0 percent, the second one of 20 years to 1.8 percent. After ten years, the interest rate has increased significantly, instead of 1.0 percent, a ten-year loan now costs 3.0 percent. At first glance, the long-term interest paid off, because for a premium of 0.8 percent in the first ten years you save 1.2 percent in the second. However, the loan amount is now significantly lower. After 20 years, the debtor with ten-year fixed interest therefore still around 1,300, – € debts, the 20-year-old but still around 5,900, – €. The long rate fixation has therefore not counted despite the significant increase in interest rates.
Low interest rates are especially worthwhile at the beginning of the term, when the loan amount is high. The bars indicate the interest payment. The red bars represent an interest rate of constant 1.8 percent over 20 years. The gray ones show the amount of the interest payment with an interest rate of 1.0 percent in the first ten years and 3.0 percent in the second ten years (left scale), Because the interest payment depends not only on the interest rate, but also on the remaining debt, in the 20th year, despite the higher interest rate of 3.0 percent, even lower interest rates are incurred. The straight lines show the residual debt (right scale), starting from the starting amount of 100,000, – Euro.
Nobody can predict how the actual development of interest rates will be. If you want to play it safe, you should therefore opt for a longer fixed interest rate. All others may save money with shorter rates. Of course it is ideal if the loan can be paid off in 10 years or less. Then you can use the lower interest rates during this period and still nobody has to fear a rate hike.
An interest rate comparison is definitely worthwhile. In addition, borrowers should also pay attention to special repayments and the possibility to change rates. The choice of the right fixed rate is important. Lower costs in the first few years should be weighed against the risk of a significant increase in interest rates.