The dream of owning your own property – being able to call a prestigious, modern house your own – is widespread. Anyone looking for a deal on construction financing (construction money) will come across many providers, some offering favorable interest rates, others less so.
- Free credit comparison
- Daily updated interest rates
- A head-to-head comparison of the best providers
- Instant calculation of monthly installments
The Internet as a guide for building and financing
Loan calculators or construction financing calculators on the Internet allow a selection of various loans to secure a real estate purchase over the years. Many issues play a role in choosing the right construction financing: mortgage rates, the property value of the real estate or the interest rate trend over the years. Is an interest rate lock on the loan effective? Which real estate financing from which provider should one request? Finally, the expiration of the payoff is also an important issue. A monthly installment must be paid over years continuously and also this should be considered with each construction financing: How many years is one at all ready to pay off a loan?
First the financial test
A personal financial test is at the beginning of every construction financing and real estate financing: How much equity capital is available?? How high is the property value? A very representative home requires more construction money compared to conventional, cheaper homes. The higher the equity, the fewer years a regular monthly installment must be paid for the financing project real estate. In general, in construction financing, the monthly installment for an expensive and representative home is higher than for an "off the shelf" home. A construction financing calculator calculates all the conditions of the loan, such as debit interest or effective annual interest rate.
Debit interest, residual debt … Confusing terms for building loans
Above all, you should also familiarize yourself with many terms from the financial language: debit interest, effective annual interest, residual debt, follow-up financing, prepayment penalty, debt rescheduling, net loan amount … But you should also not be deterred by these terms from a non-binding financing request. Some advisor from the range financial consultation for the house financing helps here further. Often, a representative example given there provides a good orientation. The conditions for building loans or. Construction financing are different in any case. Any comparison – for example with a construction financing calculator – makes this clear. Tax aspects and subsidies from KfW must always be calculated in order to effectively evaluate the financing project from the outset and to be able to make a comparison with other offers.
Effective annual interest rate
Under the term effective annual interest rate (effective annual interest rate) is understood in loans the annual costs related to the nominal loan amount – costs that are thus effectively incurred for a loan. The effective annual interest rate varies depending on the provider. If no fixed interest rate has been agreed, an initial effective annual interest rate is given. A specific inquiry with the respective provider provides information about the effective annual interest rate of a particular loan for construction financing.
Loans with fixed interest rates
Interest rate charts provide a representative picture of interest rate trends. Interest charts allow above all to use the expiration in the past for a prognosis of the costs of the loan. At present the debit interest rate for construction financing is at an all-time low. The interest rate trend is decisive for the question of whether to realize the construction financing with a fixed interest rate. The fixed interest rate of a loan is advisable if the expected interest rate development points upwards. With a fixed borrowing rate, the loan then becomes comparatively inexpensive.
After the fixed interest period: Follow-up financing for the remaining debt
In the further course, the question of follow-up financing naturally arises. The longer the fixed borrowing rate is selected, the lower the residual debt is. The follow-up financing of the remaining debt can be carried out by the same provider who facilitated the first phase of the real estate financing with fixed interest rates. Among other things, not only the borrowing rate, but also the amount of the remaining debt determines the monthly installment. Also for the follow-up financing a construction financing calculator for the personal financial test represents a meaningful assistance.
Whether a building savings contract is worthwhile for the purchase of real estate depends on whether there are currently favorable interest rates and a favorable interest rate trend. Those who have little equity should check in a financial test whether building savings is effective for them. Sometimes the decision for a loan with debit interest commitment is the better alternative. When it comes to building savings in times of low debit interest, one has to save for a long time in order to be able to start with construction financing. A construction financing calculator often reveals that an immediate entry into real estate financing with a relatively favorable annual interest rate is effectively the better solution. However, even with building savings, it is always worthwhile to inquire about financing with the respective provider.
The classic construction money with mortgage interest
When dealing with construction money you will very quickly come across the term mortgage rates. What are mortgage interest? Mortgage interest rates have to do with the lien on the property (mortgage). The mortgage provides collateral for the loan and is the traditional way to finance a construction project. Mortgage interest accrues on loans secured by a mortgage. A low general interest rate level regularly also ensures favorable mortgage interest rates. Even with mortgage rates, a comparison – for example, with a home loan calculator – effectively saves a lot of money.
Construction financing with KfW
Information on subsidies from the Kreditanstalt fur Wiederaufbau for construction financing should be requested for every financing project that extends over a period of years. This bank provides many subsidies for construction financing. A comparison of the various subsidies of the KfW shows above all that measures to save energy in new construction can contribute to a very favorable real estate financing. So any comparison should always take into account how KfW subsidies can effectively affect the borrowing rate, monthly payment, remaining debt and so on when doing a personal finance test with a home loan calculator. KfW is also happy to answer any financing request. A representative example of real estate financing with KfW subsidies is the construction of an energy-saving house.
Conclusion: Think carefully about building loans
Who acquire a representative home or. would like to build, must be able to finance this. He must know what monthly rate he can afford for the construction money. With a lower income, a high monthly payment – for example, even following the first loan to finance the remaining debt – can be associated with a noticeable reduction in the quality of life. One should therefore check in an individual financial test, how much one can pay monthly. One should note, however, that a construction financing calculator can never replace a concrete financing inquiry, which should also refer to the follow-up financing in the case of a fixed interest rate. When financing real estate through loans, one should always ask specifically what conditions (interest rates, debit interest commitment and much more) the offer in this case effectively has. Even with a possible debt restructuring, you should request information for a comparison from the provider for financing a property