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The annuity loan – most popular type of credit in real estate financing
In order for the house builder to realize his desire for a beautiful home, he is dependent on a suitable building loan. For this purpose, the banks offer different types of loans. In the majority of cases, home buyers opt for a so-called annuity loan. Its name derives from the Latin word “annus” for year. Annuity is an annual, regular payment of money.
With an annuity loan, you will receive the entire loan amount immediately after conclusion of the contract. In order to repay the debt, the borrower usually transfers monthly installments to the bank. An annuity loan is characterized in particular by:
- belongs to the group of loan types with fixed borrowing rate
- each installment consists of an interest and repayment portion
- the total monthly installment remains constant until the end of the borrowing rate fixation
House purchase financing without residual debt: the full repayment loan
Would you like to fully repay your real estate loan within the fixed interest period? Or do you want to know how to refinance a hard money loan? A full repayment loan makes this possible. Just like the annuity loan, home buyers benefit from a fixed borrowing rate for this type of loan. However, the full repayment loan goes even further. For example, it grants the borrower a consistently high borrowing rate until the remaining debt is paid in full.
So if you apply for a full repayment loan, you will not need follow-up financing later. Usual maturities for this form of credit range from 15 to 35 years. A full repayment loan is characteristic:
- borrowing rate fixation applies until the full repayment of the credit debt
- risk of rising interest rates in the future is eliminated
- maximum planning security, as the installment remains unchanged until the end of the loan
- with higher repayment rates, Bank often grants cheaper borrowing rates
Variable loan: an increase in flexibility
In addition to construction loans with fixed borrowing rates, there are also house purchase financing without fixed interest rates. Banks call them variable loans. In such a case, the lender regularly adjusts the borrowing rate to the current market interest rates.
A common variant of this type of credit is the flex loan. As the name suggests, it offers the house builder additional flexibility. With the Flex loan, you have the opportunity to make 100 percent special repayments – without paying an early repayment compensation. In addition, termination of the loan is permitted at any time, taking into account a notice period of 3 months.
Take out credit and save equity at the same time – with a constant loan
You have few financial reserves, but still want to buy a house or apartment in a timely manner? A constant loan can be the right solution. In this type of loan, pre-financing is combined with a building savings contract. Through the pre-financing, the house builder receives the required construction loan directly. In return, the borrower transfers monthly loan interest in the form of a fixed installment. Repayments are not incurred at this time.
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At the same time, you pay into a building savings contract. As soon as this is ready for allocation, the borrower thus repays part of the pre-financing. The remaining debt that still exists will be repaid via a building savings loan. Furthermore, the total term of a constant loan is between 15 and more than 30 years, depending on the variant. It has these strengths:
- usually higher flexibility than annuity loans, as larger special repayments are possible
- well suited for low financial own resources
- debit interest and installment unchanged over the total term
If you value a high level of planning security and currently have little equity capital, then a constant loan can be advantageous. This allows the borrower to start building a house immediately. Furthermore, this type of loan grants a comprehensive right to special repayment. This makes this type of construction financing very flexible.