Checklist for financing
Five Steps towards Financing Your Own Home
According to figures published by the Federal Office of Statistics, 51 per cent of Germans currently own their homes. That number is set to rise over the next few years. In a recent survey by GfK Market Research, one in two respondents who don’t yet own residential property stated that they had thought about buying a home. Prospective buyers should resolve a few key issues first to make sure their dream of owning an apartment in the city centre or a house in the suburbs doesn‘t turn into a nightmare. After all, the decision to buy a home usually comes with long-term financial commitments that need to be considered very carefully. To make the process as painless as possible, please take a look at the five key steps towards financing your own home below.
Your Balance Sheet – Review Your Financial Situation
Before buying a house or apartment, take the time to review your financial situation very thoroughly. In order to minimize your financial risk when buying a property, calculate your income and expenses as realistically as you can. Remember to list all costs, including one-off expenses such as your annual family holiday. After all, even as a homeowner you won’t want to be confined to your own four walls! After deducting all fixed costs, subtract another ten per cent of your net income, just to be on the safe side in case you need additional funds to guarantee a follow-on loan, for example.
Your Financial Plan – Calculate in Detail How to Finance Your Home
If the income column on your balance sheet shows that your financial situation is healthy enough to buy a home, make a realistic assessment of the investment required. Many buyers make the mistake of underestimating the total cost. As well as the purchase price for the property, you will need to pay additional expenses such as land registry and legal fees, which can amount to up to five per cent of the purchase price. When calculating the cost of financing your own home, don’t forget to take ongoing overheads, e.g. waste disposal costs, into account.
Your Mortgage – Find the Financing Model That is Right for You
Your financial plan is done: you know you can afford to buy the property and you have prepared a detailed cost assessment. Now it’s time to start looking for the right mortgage to finance buying your home. The general rule is: the more capital you can invest as a down payment, the better. In times of low interest rates in particular, make sure to negotiate a long-ter fixed interest rate. Flexible instalments and early repayment rights will allow you to pay off the loan faster, e.g. in the event of an inheritance.
Your Repayment Plan – Plan How to Pay Off Your Mortgage
Get your bank to prepare a detailed repayment plan for your mortgage that itemizes all costs from the day your mortgage is approved to your final instalment. In times of low interest rates in particular, it’s a good idea to select a repayment rate above the standard one per cent. This will allow you to shorten the repayment period by several years.
Your Follow-on Mortgage – the Loan After the Loan Before
If the fixed-interest rate for your mortgage expires during the repayment period, you will usually have to negotiate a follow-on mortgage. It’s a good idea to plan this in advance. You can secure a lower interest rate by negotiating a forward loan agreement years before the fixed interest rate expires. With interest rates currently at a record low, it may well be worth getting a loan of this type even though the bank will charge add-on interest.
Whether you want to buy an apartment to live in or to rent out, we can help you make the right financing choices. Part-B Immobilien is committed to making sure that our clients get the mortgage that best suits their needs. We can support and assist you from the first consultation with your mortgage adviser through signing the contract to the hassle-free transfer of funds.