Buying an existing property is relatively easy: the purchase price, usually financed by a loan, is paid – that’s it. Building a house, on the other hand, takes months. Anyone who underestimates the construction phase and does not choose construction financing flexibly enough will quickly find themselves exposed to a double burden of rent and financing rates. This not only limits the financial scope. Sometimes the entire construction project is at risk, for example when the builders are no longer able to bear additional costs such as insurance that are incurred during the construction period.
When it comes to financing your own home, you as the builder should definitely consider the following three factors:
1. Agree on a grace period
When disbursing their loans, credit institutions usually base their decisions on the various construction phases. It is important that you first agree on a repayment-free period so that there is no double burden from financing the repayment on the one hand and your ongoing rent on the other. During the grace period, you only pay the accrued interest. How long this period lasts, each builder should discuss individually with his financial advisor.
2. Calculate the commitment interest
The bank charges interest for making the loan available to the builder for financing. This interest does not accrue for the first three to six months, but after that the current commitment interest is 2% pa Since payments are always made according to the individual construction phases, builders should know how long these are apart and how high the costs of the accruing interest are for the customer are undrawn part of the loan. This also has to be coordinated individually with the bank based on the manufacturer’s plans and deadlines. Taking the commitment interest into account from the outset as part of the construction financing saves you, as the future owner, from having to dig unnecessarily deep into your wallet.
3. Pay attention to the order of the loans
The individual financing modules, the different loans within the construction financing, have different conditions. For example, a low-interest KfW loan is repayment-free in the first year. You should know how to use that. It has proven to be a common order for paying for the construction phases if you invest your own capital first, for example for the purchase of the property. The KfW loans, which are repayable in the first year, should then be called up. Only then is it advisable to use loans from the bank or savings bank. Because these usually have the longest commitment interest-free period, although they usually do not allow repayment to be suspended. For the detail, of course, careful joint planning of the individual allocation with the financing advisor and the manufacturer is also very important for the loan sequence. You can read everything about possible loan models in this article.
These three factors show that there are a number of things to consider when it comes to construction financing and that the key to a sophisticated financing plan lies in individual advice and good consultation with the manufacturer. The construction financing can thus be aligned to the various construction phases without nasty surprises due to unforeseen interest rates.
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