How does a home loan savings contract work?
Briefly explained: How does a home loan savings contract work?
The home loan contract combines a savings plan with a loan to finance a property. During the savings phase, you pay a fixed part of the home savings sum at low credit interest. The building society will later grant you the building loan at the agreed low interest rate.
The home savings sum of the home savings contract is made up of a savings plan and a loan that you can use to buy or build a property. The home loan can also be used to modernize or convert a house or condominium.
As soon as the contract is concluded, the credit interest for the savings phase and the debit interest for the real estate loan are determined. Since there are often several years between the first deposits and the use of the loan, the market for the home saver can develop unfavorably. Anyone who concludes a home savings contract at a time of high mortgage interest will not take advantage of the comparatively high-interest home savings loan when interest rates are low. If the trend is reversed, the saver benefits from loan interest rates that are below the market.
Another risk is the time planning, since the time of allocation at the time the contract is signed is not yet known and cannot be influenced by the home saver. This is offset by a great deal of planning certainty, since you know both the savings interest and the loan interest in advance.
Building society contract: difference to building loan
The building societies usually offer different building society tariffs. The tariff regulates the term, interest rates, standard savings contributions, the minimum saving time, the minimum savings credit and the minimum rating number. The amount of the commission upon conclusion of the contract (closing fee) is also determined in proportion to the amount of the home savings. If the share is one percent and your home savings sum is 80,000 USD, you pay 800 USD for the final bonus. The fee can also be a little higher.
In contrast to a classic building loan, you usually conclude the contract long before buying the house. During the savings phase, the home saver pays a fixed amount every month, the home savings deposit. In Germany, these savings are secured by the statutory deposit guarantee of up to USD 100,000 per customer.
When the home loan becomes ready for allocation
Depending on his professional situation and the amount of income, the home saver can benefit from capital-generating benefits, the employee savings allowance and a housing bonus. Even Riester funding is possible as a so-called “residential Riester”. The advantage of this additional money is offset by the disadvantage that building savings require long-term planning. If the home saver decides differently and does not claim the loan, he has for many years waived an attractive return on his savings.
The savings phase ends when the home saver has paid in the previously specified portion of the home savings amount. This usually fluctuates between 30 and 50 percent of the home savings sum. In our example (savings amount: 80,000 USD) that would be at least 24,000 USD and a maximum of 40,000 USD. If the waiting period is then fulfilled, the contract is subject to allocation and the home saver can take advantage of the home loan. This presupposes that he can prove his creditworthiness and offer appropriate security.