In most cases, purchasing a property also includes housing loans. When applying for a new building including a plot, financial confirmation by a bank also usually has to be submitted as part of the application documentation. It is therefore important to find out enough information about the various financing options in good time.
It is important at the start of any property financing to prepare a personal financial plan in advance. Included in this are both the equity capital available and monthly income and outgoings. It can be established, especially by listing monthly payments, how high the monthly surplus is for financing a credit rate. However, the error should not be made of estimating the current rent as the loan instalment. If there is no longer a surplus after paying current rent, financing should then be treated with caution. Unlike in a tenancy, owning your own home also entails incidental costs such as insurance contributions, energy costs or taxes on owners. When planning your personal finances, a surplus of at least approx. 100-200 euros should be available so that even unplanned payments can be made.
Experts recommend basing property financing on several pillars. On the one hand, sufficient equity should be available. This can be in the form of savings or a plot that has already been paid for. Even personal contributions count as equity. However, personal contributions should only be taken into account if certain construction phases have actually been undertaken. The second pillar of housing financing is always the bank loan. This too can be applied for in different ways. One of the most common ways is a loan with a variable interest rate or a loan with a fixed interest rate. In periods of low interest rates, it is definitely worth getting a fixed rate of interest because this can therefore not change subsequently for the agreed contract period. Though a variable interest rate agreement means a lower interest rate, this can change, however, as soon as the interest level rises. Last but not least, promotional loans should also be included in the housing loan. This type of loan can be applied for from promotional banks for certain construction projects and promises an even cheaper interest rate. Because usually only a partial amount of the complete financing can be applied for through a promotional loan, this type of addition is worthwhile for everyone.
At present, it is particularly interesting and worthwhile to start financing. Because interest rates have reached a record low, you do not have to pay much for interest and redemption payments. In other words, a high loan amount can be applied for at a low monthly rate. This current situation also means that many people overvalue when financing. Though the credit rate can be paid now due to the low interest rate, what happens when the fixed interest rate runs out in 10-20 years and subsequent financing needs to be made? Because interest is certain to have risen by then, it is advisable to start thinking of subsequent financing now. Therefore, when concluding a new loan, it is a good idea to have a building loan contract at the same time. With this you can also apply for a loan later on but at the current interest rate. If there are already loans which expire in the near future, it is a good idea to conclude what is called a forward agreement. For a low fee, you can secure an interest rate for the future with the forward agreement.
No matter whether it is a main bank or an online bank, every bank also wants to gain something from property financing. Depending on what the cost structure at the banks looks like, different rates of interest are passed on to customers. There is the option of comparing interest rates, especially online. Furthermore, attention should be paid to repayment and the options of making a special payment. By following all these tips, there is no longer anything that stands in the way of achieving your own home.
The situation in Germany is characterised by stability, the rule of law and, in general, a high degree of economic stability – and these considerable advantages are already appreciated by foreign investors in many sectors. Especially in countries in which capital investments are fraught with risks due to an unstable economic and/or political situation, investors seek “havens” which are safe, yet also offer an attractive return on their investment. In many countries in the world (in the so-called emerging economies, which include some eastern European countries) and in developing countries, it is often difficult for those who would like to generate assets to find capital investments. Very safe capital investments in a country such as Germany, on the other hand, make it possible to generate assets in a sustainable and risk-free way, thus protecting one’s own future and that of one’s relatives.
According to estimates which vary somewhat, the total value of all properties in Germany is in excess of 10 trillion Euros – so, with a yearly turnover of approximately 150 billion Euros, the sector offers many ways in which investors from Germany and elsewhere can pursue an investment policy which is not dependent on inflation, which involves minimal value fluctuation and which is very safe in general. The German legal system gives all buyers – including purchasers from outside the country – a solid basis for their capital investment which can be documented at any time. Every foreign owner of a German property is, in principle, entered into the land register in exactly the same way as every German owner is – and this security cannot be found everywhere in the world. In some countries, for example, there is nothing more than a spoken agreement – meaning that capital investment tends to be quite a risky business. The German land register system, on the other hand, is one of the most traceable, secure and best systems in the world – and for this reason and many more, parts of it are now used in the United Arab Emirates.
First and foremost, the entire German property sector is known for being extraordinarily stable in terms of prices, with price structures which bring good returns on investments over many years. Particularly in conurbations close to city centres, there have been huge price increases in terms of both property values and rents. Munich, which is the most expensive city in Germany, is a prime example of the effects of the German property boom. In this city, it is the security of the investment rather than the expected returns which makes investors interested.
It is not, however, always necessary to spend a huge amount on purchases – some slightly less central locations are also becoming increasingly attractive, as many people are seeking affordable yet well connected accommodation. Particularly in cities with over 500,000 inhabitants, experts expect property prices to continue to rise. Certain areas of cities and rural areas also continue to offer extremely attractive purchase prices for properties which could be suitable to use for one’s own retirement or for renting out, for example. Compared with the rest of Europe, German properties are, on average, still extremely reasonably priced – fundamental valuations are much lower than in most other European countries. This is linked to the fact that, during the past 15 years, property prices in Germany have not increased anywhere near as much as they have done in countries such as France, Holland or Spain. In comparison, however, the average rental price in Germany has great potential to catch up with the rest of Europe. Overall, the macroeconomic climate also provides a supportive environment for the development of German property prices, as Germany has seen annual increases in economic growth of approximately 2% p.a. since 2005 – despite developments on a global level which have tended to be in the direction of a recession. Property prices are keeping up with this economic growth – a situation which many experts believe is not set to change any time soon.
The legal security of the very dependable German management system, coupled with the stability and projected value development of property and rental prices in Germany, make investments in the country a very appealing prospect for foreign investors. This means that very attractive returns on investments are possible, coupled with the fact that they are almost unrivalled in terms of the safety of investment. Of course, each property must be looked at individually, however the opportunities which present themselves in Germany can be found almost nowhere else in the world. Particularly for investors in countries with unstable political situations and a questionable rule of law, Germany therefore represents an attractive alternative.