Interest rates for mortgage loans tripled from around 1 percent to over 3 percent in the first half of 2002 alone. With building societies it looks different. Therefore building savings loans are again more favorable than bank loans. How home savings customers secure favorable loan conditions.
High costs for real estate, building materials and craftsmen's services as well as rising interest rates – the general conditions for real estate financing are deteriorating. That is why more and more people are turning to a tried and tested solution and securing themselves with a building savings contract. This means that both the savings interest and the subsequent loan interest over the entire term are already fixed when the contract is concluded, even if the loan is not drawn down for another eight or ten years.
A tried and tested principle
Since the first building society was founded around 1775, the basic principle of building savings has hardly changed: If many save at the same time, the individual is more likely to be able to afford a property. All home loan and savings customers of a fund pay into a pot through which the incoming and outgoing payments are processed. Some save credit, others take amounts as loans, unneeded savings deposits are safely invested by the building society.
The individual saver first determines a building savings amount. Then, during the savings phase, he or she accumulates a credit balance over a period of several years by paying the contractually agreed standard savings contribution into the community pot on a monthly basis. As soon as the minimum balance is reached – depending on the tariff between 30 and 50 percent of the bauspar sum – the individual can obtain a favorable loan for the saved balance. In order for the building savings contract to be ready for allocation, the specified target valuation figure must also be reached. It is calculated on the basis of the savings made by the saver and the savings period that has already elapsed. The interest rate during the savings phase is usually lower than the market rate; in return, the saver later receives a loan with guaranteed conditions until the end of the term. After disbursement, the loan phase begins, during which bauspar customers repay the loan installment by installment.
Those who do not have time to save can take out a pre-financing or interim financing loan. It consists of a bauspar contract and a repayment-free advance loan. The borrower initially pays only the interest and possibly a small repayment for the loan and at the same time saves into the bauspar contract. If the latter is ready for allocation, the pre-financing loan is repaid in one fell swoop with the bauspar sum. From this point on, the homebuyer only pays off the bauspar loan. In this way, the installments are fixed for many years until the last installment is made.
Many advantages
In addition to the interest rate security, building savings contracts offer several other advantages. They are particularly flexible: the savings amount can be increased or decreased, the tariff can be changed. The contract can be terminated or put on hold. And in contrast to bank loans, unscheduled repayments of any amount are possible with the bauspar loan. In the case of bank loans, this is not permitted, only to a limited extent or only in return for an interest surcharge.
If the bank loan can be reduced to less than 80 or even 60 percent of the value of the property with the help of a bauspar loan, the interest rate for the loan is usually better. Building societies, unlike banks, do not charge an interest rate premium if the property is already encumbered by another loan that ranks first in the land register. Even for small sums, the interest rate for the building society loan applies. This can be interesting for modernizations, for example. Last but not least, building savings are subsidized by the state – with the housing subsidy, which will be increased in 2021, the employee savings allowance as well as Riester. You can find out more about this on the LBS website under "Subsidies and premiums". Here is also a funding calculator.
By the way, there is no obligation to accept the loan.
Consulting
Building savings is not a very simple product, consisting of a bundle of conditions in the savings and loan phases: Acquisition and annual fees, credit and loan interest rates, allotment requirements, repayment options and much more. Allocation is a key factor. Ideally, it takes place when the saver needs the money for real estate purchase, construction, modernization or renovation. To achieve this, all parameters must be aligned and the right rate chosen. For most building savers, this can only be achieved with the help of good advice.