The best way to save a lot of money when financing a property is to use the opportunities for unscheduled repayment. The goal: to be debt-free as quickly as possible. Why: because every year that you used to fully repay the construction financing loans, you save the interest payments to the bank. Three ways lead faster to this goal:
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Bring into the financing
- Set the repayment rate as high as possible from the very beginning
- Take advantage of the full unscheduled repayment.
Especially the unscheduled repayment is a particularly flexible way to become debt-free faster. Thus one concludes a building financing contract, which is as flexible as possible and which does not limit the own financial clearance too strongly.
Special repayment in the building financing contract is a must
It is to be made certain already with the conclusion of the erstvertrags that this contains a special repayment right. Not every financing bank offers the possibility of an unscheduled repayment in the contract negotiations. It is always important for borrowers to discuss the unscheduled repayment right on their own initiative and to have it stipulated in the contract.
Normally, banks charge an early repayment fee if the borrower wants to repay his loan earlier than agreed in the contract. This prepayment penalty can be significant. Therefore, from a financial point of view, it makes little sense to aim for an earlier repayment- z. B. Because the property to be financed is sold before the contract expires or because an inheritance is made.
The elegant way to retain flexibility and financial leeway is to pay off the loan earlier by means of a no-cost unscheduled repayment, thus shortening the loan term. But this is a matter of negotiation before the contract is signed.
Unscheduled repayment up to 5 percent of the net loan amount free of charge
Free unscheduled repayment can usually amount to a maximum of 10 percent of the current debt burden. However, this percentage varies from provider to provider. As high a cost-free special repayment right as possible should always be, however. Your advantage: the unscheduled repayment is an "optional" provision. This means that you can make special repayments during the term of the loan, but you do not have to.
5 percent doesn't sound like much now, but if you use this right consistently and annually to use even small amounts from your vacation or christmas bonus for this purpose, the residual debt that has to be financed after the end of the contract term will already be much lower and any follow-up financing will be correspondingly cheaper to have.
Do chargeable special repayment rights make sense?
Basically, you can choose between three types of unscheduled repayment options:
- Repay between 5-10 percent of the net loan amount per year by means of unscheduled repayment free of charge. 5 percent free unscheduled repayment without interest surcharge offered by almost all banks. A few also grant a 10 percent special repayment right free of charge.
- A one-time special repayment, whereby here z. B. Up to 25 percent of the net loan amount is possible within the agreed contract period; however, this usually costs an interest surcharge of. That's why you should also think about other options – e.G. B. Shorter contract terms or flexible loans to consider if you can actually expect to pay off 25 percent of the loan amount in one payment in the future.
- A set annual cap on unscheduled repayments, z. B. 5.000 or 10.000 euro per year.
The moment the granted unscheduled repayment cost a higher interest rate, it is good to think about to what extent this right is actually profitable for you.
More than 10 percent unscheduled repayment per year costs an interest surcharge
- Now, if you want the option to repay more than 10 percent of the remaining debt per year, it will cost you a few percentage points premium on your personal construction financing rate. These interest surcharges vary from bank to bank. It then also depends on your negotiating skills what interest premiums are called up.
- If you expect with almost certainty a larger cash inflow, it is to be weighed up exactly whether a chargeable special repayment right is at all worthwhile for you. Here, the advice of a proven construction financing expert – such as a mortgage broker – is essential. B. ACCEDO AG – reasonable. On the one hand, there are banks that allow relatively high unscheduled repayments free of charge.
- Saving money for unscheduled repayment
The savings option also makes sense. With debt repayment, you can save more money in the current low-interest phase or. Build up assets than through savings contracts or other forms of investment. If you want to save money in the long term, you should use the option of unscheduled repayment in construction financing. Currently, interest rates on safe investments are lower than the interest rate on loans. In addition, taxes are due on saved capital gains. Therefore, repayment of debts is always the better financial investment.
Redemption by early termination of the contract
- Every construction financing contract can be terminated after 10 years, regardless of its term. Because you have the right to cancel any financing loan – no matter how long it runs – after 10 years without giving any reason.
- If you z. B. Can count on an inheritance – but do not know when this occurs, it may well make sense to write as high as possible free unscheduled repayments in the contract and to let the contract run as long as possible for security reasons, and then to cancel this contract after 10 years to reduce the remaining debt by a one-time payment. If the money blessing nevertheless fails, nothing happens. Your contract continues with the current low interest rates.
- As with all financing models, the same applies to the question of unscheduled repayments: the best model always depends on your personal ideas and your individual financial life planning. There is no universal set of rules, but rather key points that everyone has to think through for themselves. Nevertheless, you should always and without exception include the topic of unscheduled repayments in your considerations when planning a loan.
Unscheduled repayment – don't make it too easy for your bank
Of course, every bank strives to do good business. Unscheduled repayment rights are not part of it. Because the faster the customer repays a loan, the less is earned on the interest payments. Therefore, before the conclusion of a financing several financing offers should be obtained and explicitly the amount or. Ask for the interest surcharges for a possible unscheduled repayment.
Often, a slightly higher interest rate is favorable if, in return, the highest possible unscheduled repayment right is granted. Especially if you expect a higher or lower repayment rate in the future. Be able to calculate the amount of money freed up that you would like to put towards covering your debts. As said before, the faster a loan is repaid, the more interest payments you save. This is good for your own wallet and sustainable wealth accumulation.
Calculate the savings potential and flexible advantages of unscheduled repayments with an experienced mortgage consultant and then decide on a financing bank whose ratio of interest rate to unscheduled repayment is the most advantageous for you.
The possibility of free unscheduled repayment helps to be debt-free faster. How to save a lot of money.