Should one buy now? Interest rates are low, but house prices are high, especially in growing regions such as Munich or Hamburg. Whether the purchase of a house is worthwhile can only be assessed on a case-by-case basis, but it is clear that in view of the high prices buyers will have to find cheap real estate loans.
What should be considered in a favorable real estate loan, you will find in our guide to the topic of cheap real estate loans.
Installment loans or employer loans such as equity can also be treated. First of all, the proceeds of a foreclosure sale will be used to pay the mortgage-backed real estate loans. The fact that interest rates are usually particularly favorable from exactly 40 percent equity capital also depends on the fact that banks can then use them to create Pfandbriefe. Pfandbriefe are bonds that are collateralised in the event of bankruptcy, for example real estate. Under German law, however, only 60 percent of the value may be borrowed.
The amount of interest depending on equity using the example of Metabank when buying a house of 500,000 euros and a fixed interest rate of ten years. If 50 percent is financed through equity, the annual percentage rate is 1.46 percent. If the equity ratio is 20 percent, ie 100,000 euros, then the annual percentage rate is 1.56 percent.
However, using the example of a real estate loan from Metabank, the interest rate comparison shows that the higher the equity ratio, the higher the interest rate. But this is only indirectly related to the equity ratio. The main reason is that as the equity ratio increases, the home loan price will decrease. This in turn makes the credit for the bank unattractive, because the administrative burden is similar to a loan over 50,000 euros as in a over 250,000 euros. But since banks are no longer allowed to charge processing fees when concluding credit agreements, interest rates are often higher for small loan amounts. For amounts below 50,000 euros, the Frankfurt direct bank even refers its customers to the residential loan, in which no mortgage is registered.
The choice of fixed interest rates should depend mainly on two factors, namely
- the expectation about interest rates in the future and
- your own security needs.
Now compare directly to the loan comparison
Borrowers should know the following:
- How important are special repayments for me?
- How long should the terms be?
- How much equity do I bring?
Concerns should buyers also that in addition to the purchase price still costs for the notary, land register entries and the home furnishings incurred.