Mortgages with no equity :: Important tips for financing without equity
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Contents
* The need for equity
* The construction financing with no equity
* The identification of banks to interest rate Mortgages
* The advantages and disadvantages of equity financing without
* Residential Riester as a possibility
* Important tips for financing without equity
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The need for equity
Is often heard that mortgage lending will only be possible if an equity may be presented by at least 20%. The reason for this requirement is found in the valuation guidelines of the banks, the mortgage lending at every request was first calculated the value of the property serving as collateral. To this end, the value of the land and the value of the house will be used and determines a currently achievable sale price. From that sale value is calculated then a haircut, which includes the risk of possible foreclosure and the often lower yield. Thus, the banks usually forgive their loans only 80% of the purchase or construction of an object, which leads to a capital requirement of at least 20%. One way to accumulate capital are savings contracts, and other traditional bank savings.
The construction financing with no equity
Has increased since the competition among banks, the institutions are looking for new customers. These customers, of course, include people who are planning the construction or purchase of a property, but because of this dream does not exist yet to defer capital. Many institutions therefore offer financing for several years even without equity. In these cases, the financing institutions than 100% of the production and purchase costs. Borrowers now have to bear the notary or broker fees and the establishment of their house or apartment itself. With first-class standing is even the 120% financing possible, so that no capital needs to be introduced.
The identification of banks to interest rate Mortgages
The interest in the mortgage lending are of course calculated by the amount of the loan amount and the duration of the desired fixation. In addition, calculated since 2007, but also plays the borrower's creditworthiness and the value of the property a great role which the rate of the Bank. Accordingly, the banks must for every loan that they create award, reserves for a possible failure. The more risky the loan, the greater must then be the reserves. Thus, borrowers can expect to pay only a mediocre credit with interest premiums, because the higher reserves must be funded. The same, however, apply to borrowers whose collateral may not be used to 100% and are not recoverable.
High quality collateral in the area of Mortgages are mortgages, the value of not more than 60% of property value. These loans are senior loans, is awarded for the lowest interest rate. The higher the loan amount is now, the higher the loan rate and therefore the monthly payments. With 100% Financing For example, an interest surcharge of 0,4-0,75% pa is payable at 120% financing may be even up to one percent will be charged. Already for a loan of 100,000 euros, this may mean an extra burden of 83 euros per month, which of course also affects the total interest payable and the total load on the loan.
The advantages and disadvantages of equity financing without
The big advantage that brings no equity financing is of course the immediate realization of the construction project. Clients no longer need to save up for years their necessary capital and can immediately move into their new house or apartment.
But the construction financing with no equity has its drawbacks. As described above, to determine the interest on the loan even after the value of collateral. This value is no longer given at 100-120% financing, so that banks forgive a portion of these loans blank. The interest rate premium is not calculated in this case is irrelevant. Due to the overall higher loan amounts and higher interest rates, borrowers must be able to calculate, therefore, a higher monthly charge. For this reason, the construction financing with no equity in the first place is awarded to people with high incomes. This income must also be permanently achieved, can it be ensured that the funding of the loan, even years later.
Residential Riester as a way
The homeowner served many clients as possible by 2005, despite a lack of funds the construction financing to use, because the
Home ownership was recognized as equity.
Since 2009, it is now is now possible to use the Riester subsidy for home ownership and to use the annual funding as reimbursement of compensation. About Riester savings contracts or special Riester annuity loans are introduced as the initial amounts of unscheduled time each year in funding and so reduce the outstanding debt. Thus, it is possible to use the lowest initial eradication rate of only one percent to the monthly charge, despite a 100% financing to keep relatively low.
At the same time you can save up to Riester savings agreements promoted by the state the necessary capital for the funding, which will obviously take several years.
Important tips for financing without equity
Those who decide, despite the risks for the financing with no equity, should follow a few tips to make the dream of a house does not burst after a short time.
It is important in the first place that the household budget is well planned. To this end, the monthly expenditure and revenue should be balanced, including allowances for contingencies should be included. Ideally, a savings account or a money market account is opened, to be paid on the reserves. Only if the accounts show that the funding is actually represented, should the contract be signed.
It may be useful also unscheduled incorporate into the contract. If after some time, money is available, can be a part of the loan will be repaid, thus reducing the interest burden considerably. Under certain circumstances, it is then possible to reduce the monthly loan burden.
Especially in the current situation of low interest rates, it may also be of interest to combine a portion of the loan as a variable loan. This can then would be repaid without notice, so that it decreases the credit load. However, should already be clear that no additional money can be saved, is a classic annuity loans with fixed interest rate as long as possible, the better decision, because then the credit load remains stable for a long time, so that there is predictability.
Through the monthly credit exposure to borrowers, it is particularly important that their workforce is protected. By diseases or accidents, it can happen, however, that the profession can no longer be exercised so that the income is missing for the repayment of the loan rate. For all borrowers is therefore an occupational disability insurance and term life insurance is recommended. Analogous to the credit for installment loans, which are covering the event of death, the occupational disability and the risk of unemployment, this is now available for home loans, so that all risks are covered by contracts.
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