In the wake of the 2007 financial crisis, which went hand in hand with the Lehman bankruptcy, and the European sovereign debt crisis, borrowers became the winners. Financing – like the construction loan – has become significantly cheaper in recent years.
A fact that seems to blind some households. When it comes to building finance, contracts are simply signed that are not understood. The loan conditions are the binding set of rules for all those involved for years to come.
Loan Terms: The Guide to the Building Loan
Basically, the loan conditions regulate all important aspects that play a role in mortgage lending. This includes:
- Interest rates
- Fixed interest rate
- Repayment terms
- Commitment interest, etc.
Why is it so important from a consumer perspective to deal with every aspect of financing in detail? Quite simply: In the terms of the building money, clauses and conditions can be hidden, which become a boomerang for the borrower when repayment begins.
- A construction loan is raised, which includes 150,000 USD. Unfortunately, the builder did not get enough information about the special repayment. This is not provided for in the loan agreement. Another bank would have offered him five percent special repayment per year. The consequences are serious since the household regularly receives bonus payments from the employer.
A simple example that underlines the scope of the loan terms. What should be particularly important to you?
Which conditions are particularly important?
It is difficult to arrange the individual loan terms according to a list of priorities. The bottom line is that the overall package must always fit the individual framework.
But: Some points are almost always important. This includes the special repayment mentioned above.
Repayment and fixed interest rates also play a role together. How can this be explained?
The initial repayment determines how much of the loan the client will return to the bank in period X. The fixed interest rate as a framework for the duration of the validity of the interest rate can be used in low interest rates to pay off the loan on favorable terms, possibly even within the fixed term – if the initial repayment is correct.
Conclusion: The loan terms are extremely important for mortgage lending. Every household has to be clear about what they ultimately signed.