Making the ideas come true with a loan purchase
Large purchases require great financial strength and should therefore be well planned. But sometimes the necessary funds are simply not available. Nevertheless, the need for a property or estate is given. In these cases one can profit from a so-called loan purchase. It is therefore a decisive basis for construction financing, which can be carried out without equity capital or with reduced amounts. This is a great opportunity, but it also represents certain risks. In most cases, it is not common for banks to finance the full purchase price of the property. Co-financing is based on the customer’s credit rating. Values between 60 and even 80 percent are perfectly feasible.
Calculation of the mortgage lending value
The credit institutions always calculate the mortgage lending value of the respective property first. This amount forms the actual and primary basis for the amount of the subsequent financing loan. For this mortgage purchase, the mortgage lending value represents an estimated value. In the case of a sale, the value that the property could achieve is assumed. This is used by the banks to calculate the amount and the associated sum for financing. The mortgage lending value is calculated exactly from the calculated sales value and an additional premium of at least 20 percent. The Mortgage Bank Act regulates lending and specifies the amounts with the respective percentages. It is written there that the loan may not exceed the 60 percent limit. At the same time, however, this does not mean that the customer only has to finance 60 percent. Instead, it is expressed that the first part is for financing through a mortgage. The remaining amount requires a risk premium. This surcharge shall be applied to the Lending purchase for the customer decidedly more expensive.
The individual loan-to-value purchase
You cannot find a completely agreed and flat-rate guideline value for this type of construction financing. Estimates fluctuate very strongly in some cases. This depends on the respective banks and customers. The loan-to-value purchase is thus directly related to the personal creditworthiness, equity and collateral provided by each individual customer. However, the creditworthiness is primarily taken into account in the loan-to-value purchase. Each mortgage lending value can therefore be agreed at different conditions depending on the personal situation. Thus, one’s own negotiating skills play an important role. Skilful action should not be underestimated in this context. With a little routine or intuition, significantly higher mortgage lending values can be achieved.
Let your own ideas flow in
With a good negotiation strategy at the bank, some positive results can be achieved. This makes it possible to achieve higher mortgage lending values. But also the extension of the credit term is quite conceivable and very useful for the individual customer. It is also conceivable that interest rates could be reduced. If the creditworthiness is good, it is even possible in individual cases to approve a loan-to-value purchase without having the respective equity capital at one’s disposal. This special exception to financing is referred to as 105 percent financing. However, it should be noted that this model will become much more expensive. This premium results from the higher risk for the Bank. Instead, it is customary for credit institutions (banks and savings banks) to mortgage real estate property at the usual rate of 60 percent. The building societies, on the other hand, lend up to 80 percent. A secondary entry in The land register is also sufficient for these credit institutions. The choice of the respective bank is therefore very decisive for a loan purchase and determines the further course.