There are several ways to get your own home, but very few people are lucky and the majority of people who want to fulfil this dream either have to save for a long time and/or take out a loan to make the dream a reality.
If you visit banks and other lenders to obtain offers and familiarise yourself with the possibilities of different financing models, you should be aware of various things from the outset.
The bank has nothing to give away. No matter which offer you accept, the deal the bank makes with you must be profitable for the financial institution.
For this reason, banks - often just some of their hard-working employees with an eye on commissions for concluded contracts - try to sell products to men and women without fulfilling all the necessary requirements.
This means that you should always plan the realisation of a dream with a realistic view of your own financial possibilities and for the long term, otherwise the dream can burst like a soap bubble. This can happen particularly quickly if a new home is being built and the framework conditions, such as construction costs, have changed or your personal situation has suddenly changed.
Equity capital
Rare are the contracts with banks that require the customer to provide little or only a very small amount of equity. When and whether this type of financing is right for you if you have hardly any equity should nevertheless be examined in detail on a case-by-case basis.
Even if a loan from a bank were possible, poor conditions, such as high interest rates, could be a good reason to continue renting.
It should not be forgotten here that additional costs of around 10 per cent of the purchase price must be paid for the formalities involved in the purchase, which are not normally covered by the bank but are regarded as the minimum amount of equity to be raised. These costs are due, for example, for entry in the land register and contract processing by the notary.
Otherwise, an equity share of at least 20-30 per cent should be available, for example from savings. If these come from a building savings contract, up to 50 per cent equity can also be part of its conditions. However, life insurance policies can also be paid out and even collateral from a third party, a guarantor, can sometimes be considered.
Creditworthiness
Creditworthiness, also known as credit standing, also depends on the applicant's personal circumstances, such as their income, type and duration of employment and previous career as a citizen who has utilised the services and benefits of banks.
The latter refers to existing debts and payment behaviour with banks and lenders over the years. Someone who has a reputation for poor account management will find it more difficult to be granted a loan than someone who has an impeccable customer reputation with their bank. Even if you apply for a loan from a bank other than your own, these details will be checked.
Conditions of the loan
If you have met all the requirements so far and are of the opinion that you can sell the property again if necessary in order to get out of the loan agreement, you should nevertheless be aware that many banks use clauses that do not prevent this, but can sometimes be expensive.
The so-called early repayment penalty varies in amount and must always be included in the calculations. It can be negotiated with the bank, but many make it a prerequisite in order to protect themselves from losses due to early cancellation of the loan agreement.
