The reservation mortgage is used to secure an interest rate for a mortgage over a certain period of time without the obligation to later actually assume the mortgage. The Bank gives a commitment for a certain interest rate so that property seekers are not exposed to the risk of interest rate fluctuations. The potential future borrower therefore does not yet enter into a credit agreement obligation, but secures the fixed interest rate through the reservation mortgage. This is particularly useful if an increase in interest rates is to be expected shortly, but no property has yet been found. Of course, it is not yet possible to conclude a binding loan because in such a case there is a risk of non-purchase compensation in the event that no purchase is made in the foreseeable future. The interest rate for the financing of the property depends on the mortgage lending value, for this reason the reservation mortgage is not granted by all banks, because without the corresponding property the interest rate cannot be calculated at all.
What are the advantages or disadvantages of a reservation mortgage?
The reservation mortgage protects against the interest on the mortgages rising until the later conclusion of the construction or purchase contract. An interest rate increase of half a percentage point would make a EUR 150 000 loan up to EUR 9 000 more expensive if the fixed interest rate is fixed for 10 years. With a reservation mortgage, you can save cash, because a rise in interest rates can lead to a much higher total loan amount. A further advantage lies in the fact that there is usually no commitment interest. The borrower is free to decide whether or not to make use of the loan when purchasing the property at a later date. If the interest level has fallen during the reservation period, he can take advantage of a cheaper offer from the same bank. or switch to an even cheaper bank. In addition, the interest rate for the reservation mortgage is fixed, and if it falls later, the interest advantage can hardly be used depending on the contract. In the video
the basic data for the reservation mortgage is explained. The disadvantage is that the self-employed and borrowers with low equity capital have problems and hardly receive a reservation mortgage.
The real estate market in Germany is always on the move
In the conurbations with preferred residential areas and in the well-known tourist centres, there are many prospective buyers who are looking for a new property. Young married couples are affected by the high property costs and may be able to save money by financing their own home with a reservation mortgage. Providers of mortgages are not only subject to high competitive pressure, but also to interest rate pressure. Flexible forms of financing such as the reservation mortgage are an example of this; the principle that first the property and then the real estate loan can also be reversed. The reservation credit makes it possible, who plays with the thought of acquiring a home of one’s own, to reserve a suitable credit free of charge for up to six months. Targeted information about the purchase of the property, such as information about the type of property (e.g. house or condominium) or the location and design of the future property, form the basis for calculating the subsequent interest, which is calculated at the end of half a year. Both parties (the bank and the borrower) agree on the option of concluding a credit agreement. As soon as the loan is disbursed, the lender’s claim is secured in the land register by the entry of the land charge or a mortgage.