June 15, 2019

Real Estate Loans Do Not Compare To The Residual Debt

Before taking out a real estate loan, it is important to obtain several financing offers from different providers and compare them. A comparison of financing offers the opportunity to find a particularly cheap loan and thus to ensure that the financing costs are not unnecessarily high.

Getting the offers is basically not that difficult. Essentially, this is a hard work. It is also possible to contact a mortgage broker and instruct them to solicit loans from various banks.

In the actual comparison

loan offers

However, it is important to be careful. Many interested parties make the mistake of comparing loan offers on the remaining debt. The train of thought is simple: If you request the same amount of credit everywhere and also eradication, etc. are equal, can be determined on the remaining debt, where to finance the cheapest. Unfortunately, this train of thought is not right: two factors can distort the result. First of all, there is the interest rate: the higher the interest rate, the more the repayment portion can rise during the term. In the end, the amount of the remaining debt is lower, but you have paid much higher installments and, in the end, paid more money.

 

The risk of expensive follow-up financing is increasing

REfinancing

On the other hand, many banks simplify the residual debt calculation: the full maturity is used, which is wrong. The fixed interest begins with the contract signature, payout and first repayment are usually only a few months later. Some banks take this into account, while others do not. Therefore, it is even more important to pay attention to the scheduled repayment period in the residual debt settlement, so that you can count on the right values.

Who finances today, must expect that the hypothecary interest in 10 to 15 years are higher than today. This would make follow-up financing more expensive and could noticeably increase the monthly payments. Consequently, it makes all the more sense to hedge against rising mortgage rates.

 

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