It is worthwhile to obtain offers for mortgage lending from various banks. After all, it’s about high loan amounts and long maturities – even small differences in the interest rate can mean a huge savings.
But most prospective homeowners find the search for the right property financing tedious. The reasons may vary, but lack of time or fear of financial issues usually play a major role. As a result, little time is spent – in the hope of still finding a cheap loan.
A typical procedure is to obtain several financing offers and compare them with one another about the remaining debt amount. At first this may sound absolutely logical. If the loan amount is always the same, the financing offer with the lower remaining debt seems to be the better choice.
Stumbling blocks when comparing the remaining debt
However, this does not necessarily have to be the case. The problem is that there are several stumbling blocks that are not to be underestimated in their scope.
Different rates: It is often noticeable that a higher monthly installment is due for the offer with the lowest remaining debt – despite identical initial repayment. The reason for this is the interest rate. The consequence is that the borrower pays higher installments over the years. If one subtracts this excess amount from the residual debt difference (compared to the next best offer), then the borrower has often risen.
Different repayment period: The banks proceed differently when calculating the residual debt. Some make it easy and set up a simplified calculation, ie they count on the full term, which provides for a repayment from the first month. In practice, the process is different. Usually, the first installment is due only a few months after the signature of the loan agreement (with which the term already starts). As a result, the repayment period is shorter, which in turn leads to a higher amount of outstanding debt. There are banks that consider this fact in their calculations, while others do not.
Determine the cost of mortgage lending holistically
In the face of such stumbling blocks, it is crucial to proceed correctly. In the first step, it is necessary to pay attention to the comparability of the individual financing offers. The form of financing, the repayment period and some other details must be the same in order to ensure comparability.
In practice this is far from always the case. Many banks and building societies consciously elude this comparability by making their offers deviant. In such cases, it is usually best to simply determine the total cost of financing – that is, all interest and any other costs incurred during the term. These are then compared with one another taking into account the respective residual debt amounts.
Received support from the finance expert
Do not worry, it’s easier too. Our financing specialists are happy to assist you in your search for a cheap real estate loan. We are not bound to any banks, ie only your needs are the focus. This is how we develop a tailor-made financing solution and then evaluate the terms of hundreds of financing partners. This gives you access to a suitable and low-interest real estate loan.
By the way, our service is free. So you do not take any risks and decide at any time whether and by whom you want to finance your property.