What is a real estate loan?

A real estate loan is a loan that is strictly tied to a specific purpose in order to finance real estate. A real estate loan differs from conventional installment loans by various criteria: The majority of financial institutions only grant real estate loans with a minimum loan amount of 25,000 or 50,000 euros. Another difference to a consumer loan is that you cannot use the money arbitrarily.
The loan amount may only be used for renovation or refurbishment and for the purchase or construction of houses or apartments. Real estate loans are granted by banks for both commercial and private real estate financing.

Real estate credit – different variants

Real estate loans are granted by the banks in various variants. That’s what it is:

– modernisation loans
– housing loans
– house loans

Depending on the purpose for which you are applying for a real estate loan, there may be other special features.

Modernisation loans: Modernisation loans are also called housing loans. As the owner of a house or apartment, you will need a modernisation loan sooner or later. You can use the funds, for example, to modernise your bathroom or to bring your property up to date in terms of energy efficiency. If you do not have enough cash, you must apply for a real estate loan. If the amount of the loan does not exceed 35,000 euros, it is not necessary to enter the land charge for your property in the land register. You can also apply for state subsidies for energetic refurbishment. A modernisation loan is actually a real estate loan linked to a purpose. You assure the lender that the funds are The new system will be used exclusively for modernization and will be rewarded with an interest rate advantage. As the applicant, you must provide proof that you are the owner of the property. After the relevant work has been completed, you must submit craftsman invoices to the lender.

Housing loans: A housing loan is a real estate loan with which you finance the purchase of a condominium. If you have previously lived as a tenant, you can use the saved rent to repay your real estate loan as a condominium owner. As a condominium owner, you do not benefit from paying off your loan with the eliminated rental costs, while your rent is likely to rise in the coming years.

House loans: You do not have to finance the purchase of a house exclusively with a real estate loan. This real estate loan can be composed of various components. The different elements are:

– promotional loan
– KfW loans
– building-society loans
– mortgage loan

Mortgage loans are granted as real estate loans by insurance companies, savings banks and banks. The most frequently used variant is the annuity loan. However, you can also obtain a mortgage loan in the form of a bullet loan or an installment loan.

A home savings loan is suitable for real estate financing if you have already paid money into your home savings contract for many years. Banks often offer you a mortgage loan at more favourable conditions. That is why financing advice makes sense.

KfW loans are offered to you by the Kreditanstalt für Wiederaufbau for various purposes. The purchase of residential property is promoted with a favorable real estate loan in the amount of a maximum of 50,000 euros. For energy-efficient construction and modernization you can use state subsidies up to a maximum amount of 100,000 euros.

Promotional loans are also offered by regional development banks. Most of them are aimed at young families and can therefore be worthwhile for you.

Difference between real estate credit and installment credit

When you take out a real estate loan, you can agree a borrowing rate commitment with your bank. In this case, a fixed interest rate is contractually agreed for a certain repayment period. This is independent of the actual development of interest rates.

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