Mortgage lending: Without money into home ownership

Many banks offer mortgages to no equity. But beware full financing worthwhile only in very few cases.

When not now, then when? Who does not access at the current interest during construction and property procures, is really to blame, so suggest many banks. Currently, you can obtain a home loan to combat conditions from 1.1 percent interest. But the depression, the interest during construction may have already left behind, they rise again slowly. So if you are among those which, while dreaming of owning a home but have not saved up enough capital for this: never mind. A house can also buy without own money, with a 100 percent financing from the bank. Now. This ensures low interest rates of today and for the future. Well, that’s an offer?

Many banks make it to their customers currently. According to market reports, there are currently around 20 banks and credit brokers that offer home purchase without equity, including direct banks like ING-Diba, but also branch banks as German Bank and Commerzbank, savings banks and cooperative banks. Some finance not only 100 percent of the purchase price, but the additional costs for brokers, notaries, real estate transfer tax or moving. And long customers access to abundant: “At Allianz mortgage lending, the proportion of full financing in the past five years has increased significantly: from eight to 14 percent,” the Alliance announced recently with their mortgage study. So he has almost doubled.

Many finance experts – including the Alliance itself, incidentally – but warn front of the house purchase with no equity. You are strongly advised to apply at least 20 percent of the purchase price itself. What the majority of buyers, according to evaluations by the way also creates, on average German home buyers have saved 23 percent of the property value of equity. But at least the buying utilities should be. For as tempting as it may sound, to purchase a property without having to put it high five-figure sums on the table: For the customer usually pays it not only for the bank.

Because the banks can pay for the lack of collateral expensive: On average, 100 percent financing cost one percentage point more in interest. Up to an LTV of 70 percent of the property value times the basic conditions, that is the best interest rates apply. The current start from 1.1 to 1.5 percent but are usually around 1.8 to 2.0 percent. With 80-percent lending banks already hit 0.1 to 0.2 percent to the interest rate on which are the 200,000-euro loan already 200 euros more per year. And a 100 percent financing are annually about 2,000 euros more overdue. Does not sound huge, but over 15 years adds up to a nice sum of 30,000 euros.

It also means significantly higher monthly installments. Who, for example, for 200,000 euros buys a house and fully funded at a rate of 2.8 percent, which pays a monthly 966 euros. The ceiling is a repayment of 3 percent and a 10-year maturity. At the end of the contract, he has 46,800 euros alone paid in interest and still an outstanding debt of 130,000 euros. However, bringing the customer 20 percent equity with, he pays only one monthly installment of 640 euros and within the term of just under half in interest (24,200 euros). Nevertheless, he is in the end only a residual debt of 107,000 euros. Would he also abstottern 966 euros a month, even were only 64,000 euros remaining debt left?

The worse is but for full financing until the fixed interest period expires and they need a connection credit in 10 or 15 years. First, their remaining debt is still much higher, secondly, the interest rates should be increased significantly by then. This will be the monthly installments later drive again significantly upward. The risk that many can no longer lift the rate is high. That’s why some real estate lenders sell the full financing forcibly bundled with a residual debt insurance. The must stand in an emergency if the buyer is no longer able to pay. But such assurances are expensive. How expensive, most providers do not reveal openly. In addition, the cost of the insurance is often payable completely in the contract. This makes buying a home – without money – that is again more expensive.

The crisis of savings contracts: The decline of building societies

Whoever argues that it is better than now take a higher loan than to save another five years and to pay later, higher mortgage rates, which is said also that pays off only when the interest during construction increase enormously. Whoever receives now 200,000 euros to 2.8 percent, which pays up to 2,038 credit and pays 73,000 euros in interest. Who person saves only five years 50,000 euros and then receives only 150,000 euros, which can watch safely until interest rates above 4 percent rise. Only then would the credit it more expensive than the immediate buyer.

Basically, full financing is only good for two customer groups: For young officials with absolutely secure income. And, curiously, for the wealthy who have the money for the purchase, but do not want to touch it, either cost for taxation reasons or because it is in other forms of investment more return yields than the credit.