Uncertain Times: Five Tips for Safe Mortgage Lending Free Press

akz-i Your dream home – will it explode in the face of high interest rates and expensive real estate? Ralph Oberlander, Schwäbisch Hall’s finance expert, knows how to avoid a rude awakening.

1. Financial framework: The starting point for anyone who wants to build or buy is the cash register. Ordinary income (net family income, child benefit, additional income) is compared to rent expenses, additional costs, and the cost of living or recreational activities. The rule of thumb for this is: Net multiplied by 100 per month gives the maximum loan amount. Oberländer advises: “Always factor in expenses so you can factor in unexpected costs such as auto repair.”

2. Equity: It is the first and last factor of construction financing, and equity (cash, savings, and stock) is crucial to the terms of credit. The following applies: the higher the equity capital, the better the conditions. “Equity should typically cover incremental costs of 10 to 15 percent, ideally 20 percent,” says the financial expert. For example, the rental calculator for the building association Schwäbisch Hall uses total equity to calculate approximately how much a property will cost.

3. Fixed interest rate: Despite the higher interest rates, the fixed interest rate of about 15-20 years is worth it. Because: “A longer fixed interest rate often brings attractive terms. At the same time, a home loan and savings contract can protect you from nasty surprises when it comes to follow-up financing,” Oberländer reveals. The potential interest rate risk can be determined using the interest rate calculator.

4. Repayment: the repayment installment (ie the part of the installment that pays off the loan debt) has a direct impact on costs: a low (extremely) repayment lengthens the term and makes the loan more expensive. The (extremely) high repayment severely restricts the available monthly income. Schwäbisch Hall Oberlander advises: “Payment of 2 to 3 percent per year makes sense. Contractually agreed-upon private payment options create additional flexibility. Those who can use them save credit costs.”

5. Government subsidies: About 2,000 subsidy programs make mortgage financing easier. In addition to the homeowner’s pension and German Development Bank grants, there are many subsidies from states and federal municipalities. “The benefits calculator knows which benefits are, where and for whom — or your local financial advisor,” Oberländer says.

You can find more information under the following link.

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