One person’s sorrow is another’s joy – there is no better way to describe the current situation on the credit market, because while many countries and citizens are suffering from a recession and hard austerity efforts by their governments, investors can look forward to low -interest loans ! Because: You won’t be able to build as cheaply as now in the next few decades and thus create real estate assets.

Historical interest rate low – also with financing

Historical interest rate low - also with financing

What makes investors and savers moan is a real reason for joy for home builders and future property owners: effective interest rates of 2.2 to 2.5% for home financing or a real estate loan with a term of up to 20 years are a historic low interest rate ! With a key interest rate of 0.75%, the interest rate can hardly fall any lower.

Even those who secure this low interest rate through fixed interest rates for the next 10 to 20 years, which means a premium of around 0.3 – 0.5% on the interest rate, can afford their own property at an effective interest rate of less than 3% , which is almost free compared to the building interest of the past of more than 6% and thus enables a quick repayment or a more spacious planned property.

No more room for interest – save anyway?

No more room for interest - save anyway?

When it comes to interest rates, there is hardly any room left for a loan or a further reduction – nevertheless, many loans still offer great savings potential, since not the interest rates, but the loan conditions fluctuate greatly from provider to provider and thus offer scope. On the one hand, it is not only due to different high fixed costs depending on the provider, such as: For example, the credit mark-up, ancillary fees / ancillary costs or processing fees, but also how expensive “special rights” such as fixed interest rates, the right to special repayments or, in the case of variable loans, the setting to the 12-month Euribor.

If you want a really cheap loan, and not just a low interest rate, you should make sure that the credit spread is below 1% of the loan amount if possible – even a small difference of 0.5% already makes it more than 100,000 dollars with financing 10 years savings of 5,000 dollars! The front-end load is often negotiable at almost all banks, unlike other credit-related factors. With premiums of more than one percent, you should change the provider!

The situation is similar with the ancillary credit costs, which can often amount to up to 4% of the loan amount due to high processing fees. However, the ancillary costs of a loan are also negotiable to a limited extent: Customers with a good credit rating can often push this down to 1% of the loan amount, even customers with a poor credit rating should not be satisfied with less than 2 %.

Although all fees and ancillary credit costs must also be included in the effective interest rate for better comparability, some of these are linked to creditworthiness, so that banks can “fine-tune” themselves here, except for a specific offer.

Small providers often cheaper

Small providers often cheaper

While regionally active banks and savings banks often perform less well in many product comparisons due to the higher costs, they can still score well in construction finance and mortgage loans and undercut large banks in some cases by up to 0.3 to 0.4% in the effective interest rate for long-term loans. There is currently still hope for stability in real estate financing, since mortgage loans are likely to remain cheap as a safe haven due to the high level of interest shown by foreign investors.

However, with smaller providers, it must be considered whether these special requirements apply to the borrower, such as the involvement of local companies – depending on the regional price level, this can make the loan more expensive if the construction and handicraft services are so expensive than expected.

Own contribution decisive!

The model of high equity financing is also reflected in the current interest rate: the higher the equity share, the lower the lending rate. They are currently unbeatably cheap Real estate loans and mortgage loans with an equity component of over 50%, which are still available between 2.70 and 2.90% with an interest rate fixation and term over 15 years. With an increasing equity share of up to 70 or 80%, however, premiums of 0.4 to 0.6% have to be expected.

However, only full financing with 0% equity is really expensive, since most banks have disappeared from the portfolio after the subprime crisis and are only offered by a few providers.

Long-term fixed interest rates are still the exception

Long-term fixed interest rates are still the exception

Unfortunately, many banks also know that customers will never get money as cheaply as they do now and therefore only offer fixed interest rates of up to 15 years – you have to search for 20 years and more! Nevertheless, it is worth it, because with an average term of 20 to 30 years, banks speculate that they will be able to make up for the current “loss” in a later, expected high interest rate phase towards the end of the loan, for example with follow-up financing that is more expensive for the customer.