Building percentages have historically been favorable. How high interest rates will be in a few years is predictable. Those looking to play safe with mortgage financing can opt for a full repayment loan.
A full repayment loan is one of the mortgage financing options in Germany. The peculiarity is that a loan for the construction or purchase of real estate in Germany is fully repaid within the agreed period. That is, the loan will be repaid within the funding round. Since no residual debt remains, the issue of follow-up financing is also eliminated.
Mortgages in Germany for full repayment during periods of low interest rates
Mortgage financiers can secure the current low interest rates throughout the life with a full repayment loan. In this way, you also protect yourself from a possible rise in the level of interest rates.
In addition, due to the low interest rates, more mortgage financiers can afford to opt for a full repayment loan. Because the current level of interest rates also pushes the total interest burden on the full repayment of the loan. Since the loan is repaid in full, the financing banks usually also give a lower interest rate discount.
If construction interest rates are low, borrowers can use most of the money to repatriate the loan. The percentage itself does not drop in weight as much as in the high-yield stages. This means that funding returns faster. This is especially noticeable in regions where property prices rose only moderately. Here, the interest savings are less due to higher purchase prices.
Full loan repayment cost
Monthly rates are higher for mortgages in Germany for full repayment than, for example, for an annuity loan. So the initial style of the annuity loan is basically one percent. This leaves a relatively high residual debt at the end of the peg. Unlike full loan repayment, in which the entire loan amount is paid during the term. While this increases the monthly workload, it also reduces the percentage costs in the overall comparison.
How high the monthly rate is for a borrower depends on the individual's financial situation. Principal is the amount that he can pay monthly. Hence, in connection with the amount of the loan, the maturity date and the rate of repayment of the full repayment of the loan follows.
Amount of full repayment of the loan: The starting point is the question of what time the borrower wants to be free of debt. This results in the repayment amount and the repayment period, and therefore the monthly loan rate. The shorter the maturity of a full repayment loan, the higher the monthly repayment rate.
Since the monthly repayment is usually higher and the repayment period is shorter than with an annuity loan, banks usually offer full repayment loans at cheaper interest rates. It also affects the total percentage value. They tend to be cheaper than other financing options due to the faster recycling of the loan.
Benefits of full loan repayment
A significant advantage of full loan repayment is planning security. From the agreed term and the percentage link, the monthly load follows. It remains unchanged during the entire validity period. This way, mortgage financiers know exactly what monthly repayment rates are coming to them and when the property will be paid off. This is another advantage: there is no residual debt at the end of the term. Subsequent funding is no longer a question.
Benefits at a glance:
planning
fixed execution time
fixed monthly repayment
no residual debt
lower interest costs
Disadvantages of a loan for full repayment
The flip side of high planning security is the lack of flexibility of a loan for full repayment. Because it is calculated from start to finish. Reduction of monthly payments real estate agent in bowbowing or suspension of payment by installments is not provided. This mainly applies to the possibility of special redemption (no additional charge), which can further shorten the maturity. The change of the financing bank is also excluded.
If the level of interest rates develops cheaper than agreed, this cannot be used to fully repay the loan. Debt restructuring on better terms is not foreseen. However, the legal notice period also applies here. This means that after ten years, borrowers can use their special right to return in accordance with paragraph 489 of the Civil Code (BGB) - a right that, by the way, does not belong to banks.
Special right to advertise: Borrowers can also terminate a longer loan or credit agreement in whole or in part after ten years. This must be done within a six month notice period. In this case, the prepayment penalty for the financing bank is eliminated.
Disadvantages at a glance:
low flexibility
higher rate of repayment
no change of supplier
additional load when bets fail
Decisive criteria for full loan repayment
Whether a mortgage in Germany for full repayment is the right choice depends on the financial capabilities of the property buyer. It is usually tied to the established conditions of the funding institution for ten, fifteen or twenty years.
Borrowers must have secured for many years and, accordingly, high income. For example, the income situation may change as you enter retirement age, so it becomes more difficult to pay monthly rates if necessary.