Equity component – an important factor in building loans.

 

What is equity rates?

What is equity rates?

The equity component ensures better conditions in the loan agreement and is provided by the client himself. The higher the equity component, the less money you need from the bank. croatia-lastminute.com fleshes this out

Equity gives you lower interest rates and rates, as well as shorter contract terms. Own work is also part of equity and is taken into account by the banks.  Even money that is brought in is mostly used to cover the incidental purchase costs.

Construction financing, which the builder or buyer contributes from his own resources. So this part is not part of a home loan or loan. For example, the equity portion includes the following values:

  • Assets (savings books, overnight money)
  • Income from shares / funds
  • existing property ownership
  • Building loan contracts that are due for payment (e.g. residential Riester)
  • Own work (work done during construction)
  • payable life insurance policies

Of course, financing without equity is also possible. In this case, one speaks of a full financing, in which the bank also assumes the additional purchase costs, which are actually paid for by the equity. With full financing, the banks offer much worse conditions due to the higher risk.

  • Under no circumstances should one forget to name and quantify one’s own contribution as part of the equity component in the credit negotiations. Those who are trained craftsmen or skilled craftsmen can significantly increase their share of equity and save money.

Building loan 

Building loan 

Want to build, usually can not finance this from their own resources and needs a building loan or a loan to cover the costs. Those who have equity can enjoy various advantages when entering into a loan agreement:

  • The higher the share of equity, the lower the amount of credit required.
  • The runtime is reduced.
  • The interest rate is lower than without the equity component.
  • Equity reduces the monthly charge because the rates are lower.

The banks expect between 15 and 30 percent equity capital from the owner of a planned purchase or construction of a property. The higher this part, the less money the bank has to finance in the form of a loan or loan. This reduces the bank’s own risk.

Brokerage commission, notary fees, costs for land register entry, real estate transfer tax as well as costs for renovation or modernization. Even after completion, there are other additional costs such as electricity, water, heating, waste disposal and the like.