For many people, owning their own property, whether it’s a house or an apartment, is one of the most important goals in their lives. In order to get the money you need, you will most likely want to use a real estate loan.
What is a real estate loan?
The loan is exactly what the name says: a loan that is intended for renovations and conversions of a property. Basically, it is a simple installment loan. As a borrower, you borrow money from a bank and pay it back in equal monthly installments. These rates consist of the interest on the borrowed money and the repayment rate.
A distinction is made in the banking business between private and commercial real estate loans. If you are a private individual, then you will take out a private loan, usually for a self-used of the rentable property. A commercial real estate loan is for companies that want to include home ownership in their corporate assets.
What distinguishes a real estate loan?
A real estate loan is primarily intended to serve conversions and renovations. If you want to build your own home, you’d better use a building loan. A real estate loan has a maximum amount of $ 50,000 at most banks. The building loan goes much higher.
A real estate loan is a long term loan. Depending on the repayment rate, you have to expect 10 or more years. With fixed interest rates, you can secure the same interest rate for several years. It is advantageous to keep the rate lock running for a very long time when interest rates are low. As a rule, this is 10-15 years. Some banks also offer up to 30 years, for a small surcharge, which will quickly pay off for you.
What does taking out a real estate loan mean for you?
With the application for a real estate loan, you accept a very precise examination by the bank. At this point you should already have a detailed building plan or a description of the apartment or house that you want to renovate.
By entering a land charge in the land register, the property remains the legal property of the bank until you have paid the loan in full. This gives the bank additional security and means better conditions for lending to you.
The money from a real estate loan is rarely paid out all at once. Most of the time, you get the money in installments for every job that is needed at your home. This is also intended to serve the security of the bank.
At the end of the fixed interest period, there is often final financing. Here you have the option of having the remaining loan earn interest or paying it out of your own savings.