As an addition to the financing mix, home savings are always worth considering. Even if the loan interest on the building loan contract is higher than that on the bank’s mortgage loan, it may make sense for the building owner to include the building loan, which is ready for allocation, in the financing. This is especially the case if the bank’s loan amount exceeds a certain percentage of the loan limit.
Loan amount that goes beyond the lending limit
Banks only finance a property up to an internally defined limit as a first-rate loan. For many banks, this limit is set at 60 percent of the lending value or purchase price. The so-called “first-rate loan” is also the safest from the perspective of the lender – because it comes first in the mortgage book and is serviced first in the event of a foreclosure of the property. Therefore, the bank can safely assume that the loan will be returned, even if the borrower can no longer pay its installments.
A loan amount that goes beyond the lending limit is usually granted by the banks as a secondary loan and charges an interest premium for it. For an 80 percent financing, this can currently be 0.05 to 0.3 percent. It gets even more expensive if the house builder wants to finance his property entirely with the bank loan, then an interest surcharge of 0.5 to 1 percent may apply. Most often applies to the premium for the entire loan amount, so the part of the loan across the border is considerably more expensive than the total interest would suggest.
Avoid interest surcharges through home loan
If the builder has a building society contract that is ready for allocation, he should use it wherever possible in order to shift bank financing into the first-class area. Building societies also accept subordinated loans without charging a surcharge.
However, because banks proceed very differently when it comes to the interest rate premium and the determination of the first-rate lending range, there are no general calculation models. The client should therefore have both models calculated by the bank. If the bank does not provide an effective total interest rate for financing with a home loan, you should choose the variant that brings about a faster repayment with the same monthly debit.
As the repayment share of home savings loans is higher than that of mortgage loans, it may be advisable that the builder fix the repayment of the first-class bank loan at just 1 percent or temporarily suspend it altogether. In this way, he initially repays the usually somewhat more expensive home loan, which further reduces the average interest rate on the overall loan.
When financing a smaller construction project, such as a renovation or modernization, home savings contracts may be more suitable as a mortgage loan. Because the advantages of building savings, in turn, include the fact that the loan interest rate for the building savings loan applies regardless of the amount of the loan. In contrast, banks with small loan amounts of less than 50,000 or 100,000 USD sometimes charge an interest premium of up to one percent.