Mortgage lending – banks are becoming more cautious
Equity is becoming increasingly important for mortgage lending
When it comes to mortgages and real estate financing, many banks have become more cautious and cautious in recent months. What this means for the potential owner of a home and what risks the banks currently see in real estate financing, read in the following chapters:
Significant price increases for real estate, especially in conurbations
In recent years, prices for real estate have increased significantly. The Association of German Pfandbrief Banks has determined that apartments cost on average a good 20 percent more than five years ago. However, these are average numbers. In particularly attractive metropolitan areas, such as Munich, Frankfurt or Berlin, the ratings have skyrocketed. According to a recent publication by the Deutsche Bundesbank in urban centers, apartments in multi-family houses are overvalued by 20 percent. This means that if a customer has record equity of 20 percent of the purchase price, he needs real estate financing or mortgage lending for the remaining 80 percent. The risk buffer of 20% of the purchase price in the form of equity can quickly dissipate with a decline in housing prices. If the customer is no longer able to afford the rate or annuity of their mortgage lending, the bank faces a loss if it must foreclose the property.
Rising interest rates on mortgages and real estate financing should be scheduled
The second risk of mortgage lending or real estate financing could hit clients and banks in a few years. For then, when after the end of the fixed interest period follow-up financing is needed. It is very likely that, in the long term, interest on construction money will be higher, or perhaps even significantly, higher than it is today. If, for example, customers then have to pay six instead of the current just under three percent for a follow-on financing in ten years, that will overwhelm many of the current bargain hunters on the mortgage lending market.
Reason for financing: Buying a property new follow-up financing Type of property: condominium detached house Two family house Apartment house Semi-detached house Offer without obligation
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In order to take account of both mortgage lending risks – significantly higher interest rates on follow-on financing and the possible exaggeration of prices for real estate – many banks are demanding higher repayments from customers.
Anyone who is not able to raise the same amount of money for an initial repayment of two to three percent next to an interest rate of around three percent on their mortgage lending or real estate financing is having a hard time with some banks. With a higher initial repayment and thus higher annuity, customers can adjust themselves early to a more realistic burden of five to six percent and later also handle follow-up financing of a similar amount.
In this way, banks want to reduce their own risks when granting real estate financing and mortgage lending, but also want to protect customers from themselves. Too many potential owners of real estate, such as single-family homes or condominiums, believe that they can fulfill the dream of owning their own property with unrealistic ideas or see it as a suitable investment. If you can not afford the annuity or monthly installment for mortgage lending with a long fixed interest rate and at least two percent repayments, you should refrain from buying real estate.
Building loan brokers, such as DTW | Real estate financing will find the right offer for you
Also DTW | Real estate financing acts according to this motto. The customer advisors of DTW | Real estate financing advises in the direction of higher repayment installments and longer fixed interest periods for mortgage lending. For example, it currently does not make sense for most customers to conclude mortgage lending with a fixed interest rate of just five years when buying or building a new property. If there is an initial repayment of only one percent, difficulties in follow-up financing are pre-programmed.
Building loan brokers, such as DTW | Real estate financing has access to the offer of numerous lenders and can thus determine for the customer an individually matching offer for mortgage lending. Insurance companies, in particular, which see real estate financing and mortgage lending as capital investments, have very attractive offers in interest rate comparisons, especially for long-term fixed interest rates.