Those who have the chance to buy a property and finance it through a bank can happily protect themselves these days. Basel II and further tightening of the loan issuance law make bank financing more difficult than ever. As a borrower, you have to make sure that you choose the right product and get detailed information, especially when it comes to construction finance. There are various building blocks that can be packed into the financing to ultimately have a cheap overall financing package. Anyone who has children should choose a bank that will incorporate the low-interest loans from Lite Lender-Bank. Construction financing runs over a period of a few years – depending on the contract up to 20 years. During the repatriation phase, you pay not only the repayment, but also interest, because no bank lends money for free. The interest conditions are not fixed for the entire financing period, but for 5, 10 or 15 years.
Long fixed interest rate period is particularly
A long fixed interest rate period is particularly worthwhile if it can be expected that interest rates will rise enormously over the next few years. You can therefore benefit from the lower interest rates longer. A long fixed interest period does not only have advantages because in certain cases it can even cost a lot of unnecessary money. An interest rate fixation period of 10 years also means that nothing can be changed in the interest conditions before this period expires and that no special repayments can be made. Because some banks completely exclude special repayments during fixed interest rates, while others allow special repayments, but they are also expensive to pay. And here comes the moment when the borrower has to dig deeper than originally planned.
What is prepayment fee?
If the borrower receives money unexpectedly – for example from an inheritance or from a life insurance policy that is due and if he wants to use this capital to pay off the construction financing in whole or in part, the bank will charge him a so-called prepayment fee put. So she wants to buffer the interest loss that she suffers from the early repayment of the loan with this prepayment. In extreme cases, this can be so high that you may have to consider whether early redemption on this scale is worthwhile. If you want to be on the safe side that you can make special payments and early redemption without prepayment, you must have this explicitly stated in the contract. It can of course be the case that the borrower will have to expect a slight interest premium in this case.
If you are sure that you will have capital before the end of the contractually agreed term, you should accept this interest premium in case of doubt. If you have the option of owning a property earlier than you originally planned, you should take it from the bank earlier and really live in your own four walls from now on can, then this interest rate premium should be worth it. However, if the expected monetary blessing does not materialize, this means that if the fixed interest period is shorter, the subsequent conditions will have to be negotiated very early. Anyone who is certain that additional money can be expected in a few years because a life insurance policy is due to be paid out, chooses a shorter rate fixation or negotiates an additional agreement with the bank to get the loan early without much e to be able to cover additional costs.