Financing your dream home just found and at the same time benefiting from particularly favorable fixed interest rates until the full repayment of the real estate loan is what building societies promise in advertising for so-called home savings loans.
Building societies praise this “modern” form of building society financing via the green clover. The long savings phase is eliminated.
Builders and homebuyers can benefit from the advantages of home savings financing without delay: planning security to the end and low costs.
The low-interest burden should make immediate home loan financing competitive with the usual annuity loans. Sometimes home savings loans are offered under the product name of combined loans or constant loans.
Instant home finance: a combination of two loans
The immediate financing of the building societies is aimed primarily at consumers who want to finance a property that has already been found through a building society contract, without first going through a long savings phase.
The building society loan is only offered by building societies. It is a combination of two loans.
First, a so-called final loan is taken out. In the case of a final loan, no repayments are made during the term.
The borrower only pays interest. The loan is only repaid in one amount at the end of the term. The interest on this loan should be below the usual market interest rate for annuity loans.
At the same time, the building society agrees to a repayment vehicle with its customers. A number of financial products can be considered as repayment vehicles. Since this is about building finance, the repayment vehicle is a building society contract.
This building society contract is concluded and saved at the same time as the final loan is taken out.
As a borrower, you, as a borrower, operate two different contracts: the final loan, where interest accrues, and the building society contract, where the home savings contributions must be paid.
After the final loan has expired, usually after about ten years, the services available from the building loan contract, which is then ready for allocation, will be used to repay the loan in full.
Home savings and credit interest are used directly for the partial repayment of the final loan. The remaining amount from the final loan is converted into a home loan.
Multiple models possible
This describes the principle according to which instant home loan financing works. There are several options for how the final loan and home loan contract work together.
The most common variant corresponds approximately to the principle shown. The building society gives you a final loan and concludes a building society contract, which you save in the normal way.
If the loan expires, the building society contract is ready for allocation. The home savings sum is paid out and is used to partially repay the final loan. The remaining amount is repaid with the home loan from the home savings contract.
Another variant provides for the conclusion of a final loan, the agreement of several, smaller building society contracts as repayment vehicles. The contracts are concluded immediately, but saved and ready for allocation.
Finally, there is a third model. According to this variant, a higher final loan is taken out than actually required. For example, you only need construction money of 150,000 dollars, but you take out a final loan of 250,000 dollars.
The additional loan amount of USD 100,000 is paid into the home loan savings contract as immediate savings. As a rule, the home loan saver in this model only pays the interest during the term of the final loan.
Constant loans: lending requirements and conditions
Instant home loan financing is concluded with terms of between 15 and 30 years. Sometimes longer runtimes are possible. All liabilities are settled at the end of the term.
Depending on the offer, the loan is financed up to a lending expiration of 90% of the loan value. The mortgage lending value is the market value of a property less a security margin.
The mortgage lending value is determined in a complicated procedure according to the legally prescribed requirements. As a rule of thumb, a discount of around 20% to 30% of the market value or the purchase price applies.
The loan-to-value ratio is again a percentage of the loan value. Mostly, banks finance real estate up to a loan-to-value ratio of 80%. In contrast, 90% of mortgage lending is relatively high.
It follows that constant loans without own funds are not granted. With annuity loans, full financing is also possible under relatively strict conditions. The savings phase, in which the final loan and home loan contract run side by side, is usually around ten years.
Free special repayments are generally not possible with the final loan, the advance loan. But there are exceptions. Free special repayments are possible in the home loan.
It may happen that the building society contract, which is ready for allocation, cannot be paid out on time. This can lead to repayment problems with the advance loan. In this case, some providers offer an interest-free commitment loan for a certain period of time.