In Germany there are different types of loans that enable real estate financing under different circumstances. See http://www.truereligionjeansoutletbo.com/auto-title-loan-online-click-to-learn-more-for-an-instant-online-title-loan/ for an observation
Loans are generally understood as a contractually stipulated amount of money that a lender (e.g. bank) borrows to a borrower (e.g. house builder).
The loan is only temporary and – depending on the type of loan – must be paid back in installments or in the end.
The most common types of loans
The two types of loan that are used very frequently when purchasing real estate include:
- Annuity loans and
- Repayment loan.
Both types of loan are based on similar framework conditions. The borrower concludes construction financing with the bank at a borrowing rate tied up over a certain period. As a rule, repayment is made via fixed rates.
What differentiates the two types of loan is the internal structure of the installments. With annuity loans, the monthly charge always remains the same. However, the relationship shifts:
- Interest payment and
- Redemption share.
The latter gets higher and higher with increasing runtime.
- The repayment loan is based on the determination of a fixed repayment component of, for example, two percent pa What, however, in contrast to the annuity loan, changes with the term is the amount of the interest payments, which continue to decrease.
Final loan, forward financing and other types of loans
In addition to these two types of loan, some of the builders also use other financing options. The final loan is based on the repayment of the loan debt at the end of the term – as a one-off payment. Only the interest flows to the bank during the term.
Use of loan types as:
- Interim financing
- Combination with a home saver or
- if high one-time inflows are expected.
A forward loan is based on the definition of the loan terms and the promise of the bank to provide the money at the agreed time. In return, the forward period receives interest. The whole thing is worthwhile if the capital is used in six to 18 months and interest rate increases can be expected.
With this type of loan, an immediate repayment of the loan amount is possible without the risk of a penalty payment (early repayment penalty). This form is suitable when insurance or capital investments are canceled promptly.