You want to build or buy your own home and you need financing to do this, because you have no money or little equity, what to do? There are different forms of funding, the best-known term is probably the mortgage loan.
But there are different forms and there is the annuity loan, a variable loan, the cap loan, Constant loan and the building society loan. There is also the KfW loan.
The KfW loan is a loan from the Reconstruction Loan Corporation. The advantage of this loan is the low interest rate and the long fixed interest rate. The KfW loan is usually applied for through the house bank or the financing institute.
What is annuity loan?
In the case of an annuity loan, the borrower pays back constant installments to the bank over the entire term. In the first of the loan, the interest and repayment portion are precisely determined and the loan is continuously reduced. The interest is paid at the beginning of the loan and the actual loan is not paid until the end of the loan. Benefit for the borrower is a constant burden.
What is Variable Loan?
With a variable loan, the interest is adjusted to the current interest rate every three months. The basis for this is a reference interest rate. This is the interest rate at which banks lend money to one another. The advantage here is, that when interest rates fall, the loan becomes cheaper and the disadvantage is of course the opposite. The loan becomes more expensive when interest rates rise. A variable loan can also be converted into an annuity loan on maturity dates.
The combination of the two loans is called a cap loan. The two advantages of the respective loan are summarized here. Here an upper interest rate limit is set and the interest rate is measured against the reference interest rate.
What is a constant loan?
In the case of a constant loan, the money is paid out in anticipation of an expected home savings balance. The lender goes in advance and the loan is through a combined savings- and repay the interest. During the term, part of the monthly installment is paid into a previously concluded building society loan agreement. After the allocation, the pre-financed money is repaid through the building society loan agreement and the remaining amount is granted as a building society loan.
What is a home savings loan?
When taking out a home loan, the terms for repayment and the interest rate are set. 40% of the home loan amount is usually saved within seven years and the entire home loan amount is paid out after the contract has been allocated.
The terms for repayment and the loan interest rate were already set when the contract was signed.