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With their repayment, you run into the repayment trap if the repayment is one percent in a low-interest rate phase. That is definitely not enough! You run 100% into the repayment trap of the banks.

One percent repayment, with low building interest, is very dangerous! You’d think that this is a dubious loan. The cause is the principle of the annuity.

The higher the interest rate, the higher the repayment component and the faster the building loan is paid. The same applies, the lower the construction interest, the lower the repayment component and the longer you pay off your construction loan. This is also called the runtime effect.

Building loan tip repayment and the repayment trap

What is behind the runtime effect? With an annuity loan, the remaining debt decreases with every loan installment paid. As the credit term increases, the interest component decreases. The remaining construction loan debt is reduced by the interest portion.

At the same time, the repayment share increases. The credit rate remains the same. The increase in the interest component depends on the interest already paid.

If a building loan has high-interest rates, the repayment portion increases faster. This means that the lower the building rate, the slower the repayment portion of the loan installment increases. At first glance, this sounds a bit complicated.

Banks sense the big deal

Despite all warnings, banks sell their financing with only one percent repayment. Not entirely unselfish. The bank earns significantly more money through a long term and low repayment. In addition, the bank speculates after the end of the fixed interest rate, with attractive follow-up financing. The customer is usually easily enthusiastic about it. After all, the monthly loan rates are very moderate.

But the customer often falls by the wayside with such a building loan. Since the debt is reduced only minimally, the client takes immense risks. Builders usually pay their building loans into old age. After the first ten years, the remaining debt is usually 90 percent of the original loan amount.

Our example also made the following clear: If interest rates rise from 3 to 6%, this means that the monthly loan rate will almost double. Many builders usually have no financial reserves to absorb an increase in building interest. If the repayment is assumed to be 3%, the builder has the option of reducing his repayment. However, only up to max. 1 percent. In this way, he can largely compensate for any rising interest rates. With a 1% repayment, there is no scope for a reduction in the repayment.

Stay away from a building loan that provides for 1 percent repayment

You should start with at least 2 percent repayment. Let the bank also calculate how your loan rate will develop if interest rates rise by 2 or 3 percent. If you cannot pay this building interest, choose a longer fixed interest rate. Even if this is a little more expensive.

Make sure that you get a repayment plan from the bank. This shows when you paid your building loan. Your building loan should all be paid at the latest when you retire. In summary, this means that with repayment of min. Escape 2 percent of the redemption trap.

Are Poles’ wallets really bursting at the seams and are they less and less frequently using the help of banking institutions? Mortgage – forecasts, trends, and projections – this is a summary of the housing loan market in 2020.

Last year was successful for the credit industry. The number of people who decided to make a commitment to buy a house or flat increased, which is a long-term trend. Statistics for 2019 also indicate, among others for raising the average mortgage price, which amounted to USD 288,000 dollars. According to real estate market analysts, the economic situation will also continue in the new year. So what will the next several months look like?

Mortgage – where to get the money for your own contribution in 2020?

Forecasts are worth reaching for the source, i.e. the Credit Information Bureau. Entering the new year with high GDP growth of 4% allowed the institution to hope for maintaining stable development of the banking sector in the area of ​​short- and long-term liabilities. The demand for flats does not decrease, and the accumulated savings as a result of increased wages are a chance for the necessary own contribution.

Already in the fourth quarter of 2019, according to the Central Statistical Office, the average salary in Poland was almost USD 5.2 thousand. Overcoming the barrier of another 1,000 for the first time can be good information for bank employees who are analyzing the creditworthiness of potential customers.

On the other hand, real growth is not so impressive. There is increasing talk about price increases, which can take away a significant part of the surplus previously deposited in the form of savings.

What awaits the borrower in 2020?

Last year’s boom surprised even the greatest optimists. Despite clear declarations regarding housing programs (or even one!) And ways of support by the government, borrowers very eagerly lined up at the bank. Mortgage commitment to buy your own apartment is the most common solution and the increase in the number of available apartments for rent has not changed this trend.

The Credit Information Bureau, therefore, expects that the value of mortgage loans in 2020 will exceed USD 70 billion (by 5 billion more than last year).

This is mainly due to the increase in property prices, and this in turn – a similar bull market on the building materials market. When everyone gains, economists wait for the bubble to burst. However, it seems that 2020 in macroeconomic terms will not be a year of recession, so you can still sleep peacefully.

Much really depends on the level of interest rates. The NBP has been maintaining them at a low level for many years and only a sudden slump on the international market can lead to a sudden change in this approach. Until then, the industry.

 

Which loan form is the cheapest? Borrowing money, costs money. We all know that by now. But nobody wants to pay too much. The question is therefore: is a personal loan with a fixed interest rate the best option? Or is a continuous loan a more sensible choice because the interest rate is variable?

What is the cheapest loan?

There is no general answer to that question. The interest that you are going to pay depends, among other things, on your personal and financial situation. The amount of the desired loan amount also plays a role.

If you borrow USD 5000, the interest is higher than with a loan amount of USD 25,000. The duration also has an impact. The longer you borrow, the longer you pay interest and therefore your total costs are higher.

Ask yourself; how much money can I borrow? You can enter your details via our calculation tool. Based on this, you will see a loan form with interest, duration and monthly charges. This way you get a global idea of ​​the possibilities.

Tax benefit

When you take out a personal loan to carry out the renovation in your owner-occupied home, the interest costs are tax deductible.

A continuous loan does not offer this tax benefit. A personal loan is therefore cheaper than a continuous loan.

Personal loan versus an ongoing loan

With a personal loan, the term is fixed and the interest rate is also fixed. If you take out a personal loan at today’s low interest rate, you will benefit from this low interest rate for the entire duration. You do not suffer from interest rate fluctuations and the monthly amount is fixed.

The interest rate of a continuous loan is variable. If the interest rate rises, your monthly payments also automatically increase. Is the interest rate falling? Then your monthly expenses decrease with a continuous loan. With an interest rate drop you may therefore be cheaper with a continuous loan.

Immediately a cheaper loan

Do you already have a loan, but would like to borrow more cheaply? Then take out your loan and take advantage of a lower interest rate and lower monthly costs. Request a free quote.

Anyone who takes out a loan naturally assumes that they will also be able to repay it. But sometimes there are unexpected changes in life that also affect the financial situation.

You get sick for a long period of time, unexpectedly lose your job or die. Then suddenly the money is no longer enough to meet the payment rates.

Although security has been provided for such cases, a residual debt can still remain, which is demanded by the debtor or his relatives. To hedge this risk, banks in Austria usually offer credit default insurance when lending. Before you sign it, you should know exactly what it is and check whether it actually makes sense in your case.

What is credit default insurance?

In Austria, a credit default insurance or residual debt insurance is an insurance policy that is taken out for personal loans in order to protect you from the inability to repay the loan.

Occasionally one hears the term credit insurance in this context. However, this is wrong with personal loans! In Austria, the word credit insurance refers to insurance taken out for large transactions between companies, which is usually intended to cover a loss of payment and benefits after advance payments to a supplier.

When does the credit default insurance come into effect?

Residual debt insurance only comes into effect if the borrower is unable to repay the loan due to unintentional unemployment, incapacity to work or death. If you are unemployed yourself, for example, because you quit or have been terminated due to an offense, the residual debt insurance does not pay.

Even if there is not enough money for other reasons, such as a family member’s incapacity to work or unexpected expenses, this is not covered by insurance. So, despite the insurance, you are still obliged to use your income carefully to be able to repay the loan.

If you are unable to work due to illness, the insurance only pays from the end of continued wages in the event of illness, i.e. at the earliest after the sixth week of incapacity to work. It can also happen that the insurance is limited to illnesses that already existed when the insurance was taken out.

What types of credit default insurance are there in Austria?

Depending on your personal financial and life situation, different forms of residual debt insurance can be useful for you. For example, you can take out a life insurance policy, also known as risk life insurance.

You can choose insurance against disability or disability or one that only applies in the event of unemployment. Any combination of the three variants is of course also possible. However, insurance is often required by the bank to a certain minimum extent.

What to look for in the event of unemployment with a credit default insurance?

As already mentioned, this insurance only applies if you are unemployed through no fault of your own, such as if your employer goes bankrupt, staff cuts or dismissal due to lack of demand. If a temporary employment contract expires, the residual debt insurance does not pay! You should have planned it in from the start.

The insurance covers the payment installments until you have found a new job. After that, even if your income is lower than before, you will have to repay your loan yourself.

Please also note that the duration of the start of payment can be determined differently by the insurance contract. Some insurance companies only pay for a certain period of unemployment, others only after a certain period of time.

When is the residual debt insurance useful?

Before taking out residual debt insurance, check carefully whether it is really necessary. For example, if you already have life insurance, you are subject to protection against dismissal, for example as a civil servant, or if your spouse’s income is high enough to cover the loan in an emergency, the insurance is unnecessary.

Residual debt insurance is usually not used for small loans with low payment rates or high collateral that is expected to cover the entire payment amount. With large amounts of credit and if you have a family to look after as a single earner, however, it usually pays off.

Read the contract carefully, work out possible scenarios and, if in doubt, get advice from an expert independent of the bank before you decide for or against the insurance.

What does residual debt insurance cost?

The number of premiums for residual debt insurance can vary widely. It depends on the services included and the amount of the loan.

The duration, age, and any known illnesses also influence the risk of the insurance company and thus the price. If possible, compare prices and conditions from several providers before you decide.

If the cost of the residual debt insurance exceeds 10% of the loan amount, you should definitely look for cheaper offers, or check again whether the insurance is really necessary.

Good Financial wants to lower the maximum interest rate for consumer loans from the current 15% to 10%. On Friday, December 5, 2014, he opened the consultation process for a corresponding amendment to the regulation on the Consumer Credit Act.

He also suggests introducing a simple and clear calculation mechanism for the future and anchoring it in regulation.

Maximum interest rate

The maximum interest rate for consumer loans prevents misuse in the credit system. In addition to state price monitoring and the regulations against overreaching and usury, it protects consumers from over-indebtedness.

It also reduces the risk that financial institutions will increasingly issue risky loans due to a high-profit margin.

Low-interest-rate level

In 2003 the Good Financial set the maximum interest rate for consumer loans at 15% per year. The persistently low-interest-rate level now requires adjustment. According to the will of the legislator, the maximum interest rate should depend on the amount of the refinancing costs.

The Good Financial, therefore, proposes a calculation mechanism that is based on the costs that financial institutions, in turn, have to pay for the borrowed money. The maximum interest rate is made up of the three-month Libor determined by the

National Bank and a surcharge of 10 percentage points, whereby the value calculated in this way is rounded up or down to the nearest integer.

This currently results in a maximum interest rate of 10 percent.

What negative effects could this change have on consumers?

On the occasion of the introduction of the maximum interest rate, various arguments were raised against its introduction.

• People who did not have the best debtor qualities could no longer get loans in the future
• The result would be less generous lending due to falling earnings
• It could drive the consumer into illegality

A maximum interest rate of 12% would, therefore, be a reasonable solution. With moderately falling earnings, the credit banks could ensure that lending remained unchanged. You as a consumer would benefit twice. Apply for credit now

Interest rate home loan finance. Specialist Good Finance of construction financing from start to finish – Harald Gerhards, Helmut Keller as well as the repayment of the production costs of a building or an apartment.

Disclaimer of liability for interest. all legally justified claims for damages that may arise. For the borrower in the context of the mortgage, the Z. can lead to rental income, which leads to increased income from V + V. The building saver can follow the differences in its annual accounts.

Savings compared to commission loans after 25 years

Savings compared to commission loans after 25 years: 1,404? before an effort-based consultation fee. Savings compared to commission loans after 25 years: 3,511? before an effort-based consultation fee. Savings compared to commission loans after 25 years: 7,022? before an effort-based consultation fee. Savings compared to commission loans after 25 years: 10,533? before an effort-based consultation fee.

Your advantage when it comes to advising on fees for mortgage lending? We can reduce the commissions to zero for ourselves. In the case of fee remuneration, the interest is lower. Overall, you pay less for mortgage lending. Because, unlike traditional brokers, we are largely commission-free, unlike commission brokers, we are not looking to conclude contracts.

In this way, we can provide you with independent financing proposals for your construction financing. We serve over 300+ product suppliers via the EUROPACE platform, including the major credit institutions, insurance companies, and housing associations in Germany. Phase 3: We take part in the tender for the condition of the external capital, ie the financing loan, which we can receive from the banks free of commission.

Real Estate Financing Interest Benefits

Benefit from our real estate offer and secure your local interest rate advantage with Good Credit. Financing up to 30 years on favorable terms for the inclusion of interest commitments and quick repayment Play your trump card now and save yourself low-interest rates. In the case of particularly attractive locations, we currently offer you a national interest rate advantage for your home.

Long-term financing and quick repayment – we have good conditions for your real estate loan financing.