Bremen – If you want to finance a property, you can currently enjoy low interest rates. But how long will that be? What homebuyers should consider when interest rates rise again and for whom such an investment makes sense.
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Although the US Federal Reserve has just postponed the planned withdrawal of its zero interest rate policy because of the weakening economy. But at some point – as the financial experts agree – the interest rates are raised again step by step and thus also loans again more expensive. This begs some buyers to ask if they should invest quickly now. In fact, it may be worthwhile. But not for everyone.
Hartmut Schwarz from the consumer center Bremen does not expect any major changes for the near future. It will continue to be possible for enough consumers to buy real estate. Therefore, he advises against hasty decisions – only to benefit from the currently historically low interest rates. “The only danger we see is that people now borrow money that they can not afford,” he says.
The consumer advocate recommends that you carefully calculate the monthly rate of a loan and when it must be paid off. “For financing, you should plan a maximum of 30 percent of the available net income,” says Schwarz.
Annabel Oelmann of the consumer center North Rhine-Westphalia in Duesseldorf advises to bring along sufficient equity: 20 to 30 per cent of the total sum, thus of purchase price and additional costs, are a good condition for the borrowing. Those who calculate too tightly make life difficult, warns them. Finally, there are often costs that consumers have not planned before.
Financial adviser Max Herbst from Frankfurt am Main considers a loan already feasible if its own funds cover the additional costs. Usually it is 10 to 15 percent of the purchase price. It is rarely worthwhile to postpone the building project, says Herbst. For example, a family often does not have the opportunity to save enough to get the much-recommended own contribution of at least 20 percent of the total costs. Nevertheless, she often pays 800 to 1000 euros per month for a flat. That adds up to 12,000 euros a year. Money that may be better invested in your own property.
Fall calculates: For a home purchase loan of 200,000 euros is often recommended an equity stake of at least 40,000 euros. Who wants to save this sum in five years, must set aside 660 euros per month. Consumers who can afford to save such a sum could immediately invest it in the repayment of a loan. Important: At least two percent repayment buyers should be able to afford according to Schwarz. Those with little equity need to look for a long term, preferably 20 years.
Annabel Oelmann is more cautious. While it might make more sense to start financing immediately, she points out, “If someone can afford extra spending on a monthly basis at a high rate, but has not yet managed to save equity, what is he asking? has spent his money so far. ” Sometimes a potential buyer may theoretically have enough income to pay installments, but first he has to learn how to properly manage it. “Therefore, it may make sense to save another five years, to do a trial run, as it were, to see if I can really make the payment every month,” says Oelmann.
Rising interest rates do not necessarily lead to priceless loans, says Hartmut Schwarz. He calculates: Someone takes out an annuity loan of 200,000 euros with a term of 15 years – with a repayment of 2 percent and 2 percent interest. In the end he has a residual debt of almost 131,000 euros. In a follow-up financing with 6.5 percent interest, he has fully repaid his debts after 29 years and seven months. Who concludes a loan in the same amount, but with 4 percent debit interest, has after Schwarz ‘calculation after 15 years, a residual debt of almost 118,000 euros. With a follow-up financing with 6.5 percent interest, the consumer can repay his debts in a total of 26 years and two months – for a loan with special repayment even faster.
“With an annuity loan, switching interest rates to repayments at higher interest rates is faster,” explains Schwarz. As part of the residual debt is repaid at each installment, the interest component is reduced. Therefore, the repayment portion will be higher.
Rising interest rates do not necessarily make a home purchase so prohibitive. However, Max Herbst points out that houses and land may become more expensive in the years to come. Then consumers have to raise higher loans.