Buying a home is very attractive for various reasons: On the one hand, families have the greatest possible comfort in their own home and children can grow up optimally in this environment. On the other hand, a paid property in which you can live rent-free is an excellent pension.
Most of the private property buyers finance the purchase of a house with debt, and there are various forms of credit to choose from. It is particularly widespread to take out an installment loan for homeowners, which due to its high level of security has specific advantages for both the borrower and the bank.
Annuity loan for homeowners
As a rule, a loan for private construction finance is contractually designed as an annuity loan. This special form of installment loan is characterized by the fact that the same amount has to be transferred to the bank every month.
The installment consists of a repayment and the interest payment due. Since the amount of the loan is continuously reduced by the repayments, the interest portion falls, so that an ever increasing percentage of the monthly installment can be used for the repayment.
With such an installment loan for homeowners, the amount of interest is fixed throughout the term. For the borrower, this means that he has the highest possible degree of planning security. These real estate loans are usually closed over terms of at least 10 years, but often also for a much longer period. In many cases, after the end of the fixed interest period, there is a significant remaining amount that still has to be repaid. Then it is necessary that the borrower endeavors to obtain follow-up financing with the lowest possible interest rate.
Credit check and collateralization
In the case of an installment loan for homeowners, checking the creditworthiness is of particular importance. Because it must be ensured that the borrower will in all likelihood be able to reliably repay the high loan amount in accordance with the provisions of the loan contract over the long loan term. In order to check the creditworthiness, extensive information on the personal financial circumstances must be provided. In addition, supporting documents such as current salary statements or income tax notices from last year must also be submitted.
If there is no objection to the customer’s creditworthiness, the loan is approved. In order to protect the bank’s claims, a real security on the property is usually entered in the land register. If, contrary to expectations, the customer does not meet his obligations from the loan, the bank realizes the property, often also by means of a foreclosure, and uses the sales proceeds to settle its outstanding debts.