Acquisition financing - our service for buyers
Acquisition financing - our service for buyers
Aside from our support with restoration and renovation works, the service for our customers also includes help with acquisition financing.
For many years now, we have cooperated with prestigious finance brokers and service providers. As such, we are able to quickly get you an ideal and non-binding consultation to ensure that you can finance your property at the most favourable terms.
Moreover, we are happy to provide you with useful tips and the right contacts, so you can find the right financing for your dream property.
Real estate financing tips
We have summarised some valuable suggestions and tips on financing your property, in order to provide you with a quick advance overview.
Ensure you are well advised when financing your property
Many people dream of owning their own home as an investment. However, realising this dream takes more than just waiting for one’s great fortune - instead, it is necessary to do something about it. Buying a house or flat is time-consuming and costly. There is a great deal of paperwork to do which can quickly overwhelm a lay person. Furthermore, not many people are able to buy a property outright. This is why most buyers have to fall back on borrowed capital and conclude an acquisition financing contract. The required capital can be borrowed from banks and various financial services companies in the form of credit finance.
In theory, acquisition financing is simple: once you have decided to buy a property, you go to the bank and apply for a loan to finance the property. The bank pays for your apartment or apartment building and you pay the loan back to the bank in monthly instalments over a fixed period of time. Paying back the loan can take several years or even decades, depending on the term set in the contract.
In practice, financing is unfortunately significantly more complicated. There are many potential lending institutions, different financing options and various types of loans, each with their own advantages and disadvantages. This makes it easy to lose track. Fixed interest rates and repayment periods also play an important role. In order to not lose any money - for instance by choosing the wrong fixed interest rate - a thorough financing consultation is essential to attaining your successful real estate financing. Comparing various offers may also be worthwhile to save money, but can be very complex and onerous.
Is there a difference between financing an apartment or a house?
Whether apartment or house, both are financed through so-called real estate financing. The term construction financing also comes up frequently in connection with real estate financing. Construction financing can be used either for buying an existing property or for newbuilds. The biggest difference between financing a house and an apartment is the type of property to be financed.
Real estate financing contracts, however, include a purpose limitation - regardless whether it is a house or an apartment which is to be financed. This means that the finances being made available may only be used for the precise purpose determined in the financing contract.
In the case of a residential apartment, for example, the determined purpose may be personal use. Residential financing may be considered in this case.
Investor financing comes into play if the property is to be rented out. The lender may furthermore demand proof of use for real estate loans. It is this purpose limitation which makes real estate financing so different from a “normal” instalment loan which has no purpose limitation.
Ten steps to the right acquisition financing
Be mindful of the following points when selecting the property and the financing loan to ensure that your financing is built on a solid foundation:
- Set a financial limit before you begin viewing properties. How much capital do you have, how much would you have to borrow from a financial institution? Take this information into account when looking for or selecting a suitable property.
- Raise as much of your own capital as you possibly can. A minimum of 20 percent is a good guideline. The more of your own capital you contribute towards financing the property, the lower the interest rate will be. It can make sense to fall back on reserves for this purpose.
- Include all additional expenses in your planning. Property transfer tax, for instance, is at 6 percent in Berlin (updated 2016). Entry into the land registry costs money. This also applies to the conveyancer involved in purchasing the property. A property costing 300,000 EUR can easily accumulate additional costs of up to 24,000 EUR which have to be budgeted for in addition to the purchase price.
- Although you should raise as much of your own capital as possible, ensure that you retain some cash reserves as well. This will allow you to pay unforeseeable costs and ensure that your financing remains secure. A good reserve might be about three net monthly salaries.
- Do not take the first loan offered by your personal bank. It is best to get advice from an independent loan broker who can provide you with offers customised to your situation. You can then take these offers to regional banks or your own bank and use them as a basis for negotiation.
- You should absolutely compare the annual percentage rate (APR) of various banks. The APR considers other factors, including nominal interest, administrative fees, as well as interest and repayment calculations.
- Adjust the planned financial burden according to your income. Pay particular attention to ensuring that your monthly outgoings from repaying the loan do not exceed 40 percent of your net family income.
- As tempting as it may be, do not set the repayment rate too low. In the current low interest period, you should aim for a repayment rate of 2 to 3 percent. The repayment period would be too long if you repay only 1 percent without any unscheduled repayment options.
- We currently have a historically low interest rate which you should try to retain for as long as possible. It is therefore best to get a fixed interest rate. Aim for at least 10 years, ideally 15.
- Already begin to consider any debt remaining once the financing period ends, as well as possible subsequent financing.
Our customers are the focus of everything we do. It is our pleasure to support you throughout the entire acquisition process and in finding suitable financing options for your Berlin property. We will continue to assist you even after you have acquired your property - for example, if you are planning to renovate or restore it or require legal assistance. We are always happy to connect you with our capable partners - just ask us!