For a loan with a property as collateral two cases have to be distinguished: On the one hand, the mortgage financing or purchase financing for such. This does not only apply to a new building or the acquisition of an existing property, but can also be used for extensive renovations and modernization. On the other hand, it is possible to use a property that has already been paid off as security for borrowing and thus to benefit from the favorable interest rates of a real estate loan.
The property as collateral when borrowing to build or buy
In the case of a real estate loan, the property purchased serves as collateral. Thanks to the excellent coverage, the interest rates for this type of loan are significantly lower than for a standard installment loan, with no repayment guarantee except for the expected income. Usually the financial institutes expect an equity capital amounting to twenty percent of the incurred purchase price or construction costs, but calculate this from different points of view. In part, all financing components not taken over by the respective bank, and thus even the building society loan and a promotional loan, are included in the determination of the equity ratio. Other financial institutions, on the other hand, exclusively relate to the actual assets available in the equity valuation.Homes as well as investment properties can be financed. In the case of the latter, the banks expect a calculation of the expected rental income in addition to the usual real estate loan documents.
Borrowing for any purpose with a property as collateral
As an alternative to a installment loan, it is possible to take out a freely usable loan with a property as collateral. This variant is suitable for larger amounts required, where the interest savings higher than the additional costs incurred by the Notarbesuch and the land register entry. At the same time, lenders can reduce their credit rating if their client provides property as collateral. Thus, it is possible to successfully apply for a loan with a property as collateral even with a soft Schufa negative entry.The easiest way to apply for real estate is to lend a property as collateral if they do not cancel the mortgage after repayment of the purchase or mortgage. In this case, it can be used again at any time. However, this advantage only works if the previous partner bank also pays the new loan. In other cases, a cancellation of the previous land charge is required so that another financial institution can be registered in the first place. The possibility of maintaining the previous contribution and giving the new lender second place is only theoretical, since the latter will not be satisfied with a secondary mortgage.Interested parties in a non-mortgage, home modernization or acquisition credit with a property as collateral pay attention in their credit comparison on which financial institutions offer such. To a not inconsiderable extent, banks tie up real estate lending that the customer actually uses the money for appropriate purposes. Credit seekers are thus looking specifically for a lender, where they can use the property for any borrowing as collateral.Incremental costs are generally prohibited when lending. The loan with a property as collateral is sometimes an exception, as the lender may charge reasonable estimates of the value of the property. The banks and credit intermediaries either demand the esteem of a sworn valuer or commission one of them. Also, the inspection of the property to be leased by a dedicated expert is conceivable.
Claims to a real estate loan
The punctual payment of all credit installments is mandatory for a loan with a property as collateral, as a serious late payment can lead to a foreclosure sale. The legal provisions protect private real estate borrowers against such drastic measures in the event of a single payment default, but not in the event of repeated non-operation of the loan. The best protection against default offers reasonable monthly installments and a rate protection insurance, the conclusion of mortgage loans is advisable.In the case of a loan with a property as collateral over a medium amount, it is possible to make the full repayment within the first fixed interest period. For higher credit sums, however, the fixed interest period is shorter than the total term. The longest possible binding period facilitates the calculation of the installments due, especially since the borrower can not be sure on which conditions he will receive follow-on financing. Early repayments can be contractually excluded or limited in real estate loans. In addition, the bank may charge a prepayment penalty during the first ten years of the loan. The ideal real estate loan agreement allows free special repayments, at least to a limited extent.As an alternative to an annuity loan with fixed interest rates, the loan with a property as collateral can be selected from the bullet loan and a variable-rate bank loan. Final-term real estate loans are taken up by homeowners, predominantly in insurance companies, whereby the repayment is made from the expiry of a simultaneously agreed life insurance. With some banks, the tapping of a loan with a property as security is also possible, in this case, a savings contract loan repayment at maturity. Variable lending rates are often used when borrowing through a foreign bank. They are initially cheap, but are regularly adjusted to the current market situation, so that they can increase noticeably during the term.