Nobody should take out a real estate loan without having previously obtained and compared several offers from different banks. But many prospective borrowers are unsure because they do not know what to look for. Nobody needs to feel that way, after all there is our free financing advice, which leads to a favorable financing.
Nevertheless, we would like to point out at this point what should be considered in the financing comparison and what mistakes are made. In today’s article, we focus on comparing the amount of the remaining debt, which seems logical at first glance, but is still risky.
On demand, almost all banks contribute so-called repayment plans to their financing offers. You can see which remaining debt is still due after expiry of the fixed interest period. Many interested people think that they only have to compare the individual amounts of the remaining debt and then decide on the loan offer, which has the low amount. But as already indicated, this is not recommended. The two main reasons are presented below.
Divergent calculation bases
It already starts with the fact that not all banks expect the same. Many banks calculate the remaining debt on the basis of assumed ideal data. The entire term is used, ie for each month a reduction of the remaining debt is determined. But in practice, the repayment process is different because often elapse between contract and payout several months. Some banks, in turn, take this into account, which makes the remaining debt amounts in their offers higher. They appear more expensive, although ultimately only a shorter repayment period was scheduled.
Total financial burden is excluded
Just because the balance is less, the loan does not have to be cheaper. Who makes a higher rate, repays more. This may sound logical, but even with the same initial offset this effect occurs – and many interested do not think so. With a higher loan interest, the monthly installment is higher, which increases its repayment installment over time. Therefore, the residual debt at the end of the term is lower, but overall, a higher total amount was paid to the bank, which relativizes the advantage again.