How do you get low interest on mortgage loan?

Building finance stands and falls with the amount of interest. To reduce the burden of high interest rates, a sufficient share of equity is necessary. In addition, a thorough comparison of interest rate offers from different banks and advice from experts is recommended.

Whoever buys a house or condominium usually needs a building loan to finance it. The amount of the interest and the repayment determine the monthly debit from the loan rate, initially until the end of the debit interest rate. Since real estate financing runs for 10, 20 or even 30 years, it is important to take a close look at the conclusion of the contract.

The bank takes various factors into account in order to determine the amount of the mortgage interest. The duration, the costs of the bank and of course the risk that the borrower will not repay the loan play a role. The bank decides on this default risk by analyzing the professional and private situation of the borrower and his assets. If the bank considers it very likely that the borrower will repay the loan on time and in full, it bears a lower risk. In this case, the loan can be made available at lower building rates.

How does the bank determine the amount of construction interest?

For example, when does the bank calculate a higher risk premium? The buyer has low equity, low income and is employed in his current job during the trial period or on a temporary basis. The risk premium increases the borrowing rate. Therefore, the purchase of a property should best be planned in the long term. Ideally, the buyer saves money a few years in advance in order to be able to bring in as much equity as possible.

The quality of the property to be financed also plays an important role, because it comes in as an additional security via the land charge. The bank evaluates the property in order to determine the mortgage loan value for the mortgage. This is a sales value that the lender can still achieve even if the demand for real estate deteriorates.

Should the customer no longer be able to service the loan, the bank can conduct a foreclosure of the property. The bank consequently takes a number of risk deductions and, when in doubt, sets the value of the property conservatively low.

Get low interest on mortgage loan

A shorter loan term and a high proportion of equity are rewarded with lower interest rates. Overall, many factors play a role, which makes real estate interest rate a complex transaction. If you are not a specialist on the subject yourself, you should seek expert advice. 

In times of exceptionally low interest rates, the markets work differently than usual. If you can take out a loan at very low interest rates, you should secure the favorable conditions for as long as possible.