Fast repayment on a real estate loan pays off

The purchase of a property is still under a good star in terms of low-interest real estate loans. Loans for real estate are still quite cheap. However, experts believe that the tide could turn and interest rates for real estate loans could rise again. To find out how you can secure better terms with a quick repayment loan, click here.

Quick repayment loan – how to protect yourself from rising interest rates

A quick repayment loan is a conventional annuity loan that is repaid within a comparatively short period of time. One speaks with a fast amortization loan also frequently also of a full amortization loan. The great advantage of this loan is that the interest rate is fixed for the entire term. Follow-up financing is not planned. When property buyers opt for a quick repayment, they have a high degree of planning security. You determine the timing of the financing yourself. Average interest rates for real estate loans with a fixed interest rate of ten years have risen again since May 2015 and are currently around 1.76 percent. Interest rates of 1.76 percent for a real estate loan are still favorable, but no one can say how long this level will be maintained.

As a real estate buyer, you can protect yourself from rising interest rates by taking out a quick repayment loan now. Such a loan is characterized by terms between 10 and 30 years, a fixed interest rate for the entire term, and the full repayment of the loan within the term. This eliminates the need for follow-up financing. Real estate buyers can thus secure today's favorable interest rates for a long period of time with a quick payoff loan and not have to worry about rising interest rates on real estate loans. In addition, many banks grant an interest rate discount of up to one percent if it is a quick repayment loan. This finding was made by Stiftung Warentest as part of its random sampling for the magazine "test" (08/2015). For real estate buyers, a quick repayment loan is worthwhile in several respects.

Fast repayment – high repayment rates

Rapid repayment of a real estate loan - full repayment loan

Real estate loans are characterized by high loan amounts and long terms compared to conventional installment loans. While a difference in loan interest rates of only a few percentage points has little impact on small loans with short terms, a few percentage points on real estate loans can end up making a difference of several thousand euros. Here a comparison of the different credit offers is worthwhile. As attractive as quick payoff loans are, they are not necessarily suitable for every home buyer. These loans are not only associated with relatively low interest rates, but also with high repayment rates. To be able to repay a real estate loan within short term, the monthly rate must be set high. For the borrower, this can be a major burden.

Here it is important to weigh whether the monthly high burden fits into the budget or not. Fast repayment loans are recommended above all to prospective borrowers who have a high monthly income. To consider is, can one the credit installment no longer raise, the residential property is in danger. And if one ultimately finds that the monthly repayment installment was set too high, and would like to reduce it, this is associated with additional costs. The interest discount may be invalidated by later adjustments. Adjustments are often associated with compensation for the bank or the borrower is offered a new contract with new conditions. Also the fixed interest rate is then no longer given. This means that there is a risk that the remaining amount will have to be rescheduled with the help of a more expensive loan.

Who would like to use a quick repayment loan, should also have sufficient equity, so that only a manageable proportion of the purchase sum must be financed by a loan.

Real estate loan – loan comparison of the offers

Anyone who wants to finance a property through a loan should compare the offers on the market. Ideally, not only quick repayment loans are included in the comparison. Other real estate loans with favorable interest rates can also be a real alternative to a full repayment loan. Quick repayment loans are comparatively inflexible and allow the borrower little or no adjustment.

Many banks exclude not only changes in the installment amount, but also unscheduled repayments with a quick repayment loan. Real estate loans with short terms and high repayment rates are suitable for people with high incomes for whom high monthly installments are not a problem.

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