Friday, December 04, 2020

Constant loan as a mixture of advance loan and building society contract.

If you are thinking about building finance, you have several options. He can apply for a classic building loan from a bank or he can conclude a building society contract with a building society.

A special form is the constant loan, which is offered by both building societies and banks.

Interest that is also fixed for the entire term.

Interest that is also fixed for the entire term.

There are actually two combined loans. One of these is paid out immediately, the other as a so-called advance loan only significantly later.

Overall, the constant loan consists of two different types of loan with three parts:

  • Annuity loan (with normal repayment)
  • Home loan (with savings to be paid and a repayment)

Due to their complex structure and the two combined variants, these loans are not always completely transparent. The borrower should therefore pay attention to the contract details.

  • Anyone taking advantage of a constant loan should not only keep an eye on the effective interest rate for the classic loan, but should also find out about the total effective interest rate. It is usually set much higher, which drives up costs.

Interest rate for the entire duration of the loan,

Interest rate for the entire duration of the loan,

It can rely on the fact that he does not have to accept higher costs due to rising interest rates.

In return, however, the borrower must have a strong will to survive a long savings period, which is usually between 12 and 15 years. Another benefit arises for those who do not exceed income limits. In this case, you benefit from the housing premium. It is almost always possible to make special repayments and thus reduce the financial burden.

However, there are also disadvantages with this form of financing. The combination of two forms of financing increases the administrative costs because everything has to be processed twice. It can also happen that the home loan is not ready for disbursement on the target date. In this case, so-called interim financing would be necessary.

Calculators for this form of financing are available, but usually calculate the corresponding conditions on request. If you want to do the calculations yourself, you can use a classic financing calculator or interest calculator to get at least initial information about the costs involved.

Prepayment penalty can be redeemed. If you don’t follow these deadlines, it can be really expensive if you want to redeem the constant loan early.

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