Although building society savings are still in vogue, the number of borrowers is declining. In the meantime, the majority of builders and buyers are opting for a classic mortgage loan, which is taken up by a bank shortly before the project starts. Among other things, this development is due to interest rate developments. Nobody takes out a home savings loan whose interest rate is higher than the current mortgage interest rate.
Home savings loans are important
Especially as an interest rate hedge. Classic mortgage loans are mainly concluded with fixed interest rates of 10 to 15 years. This is followed by follow-up financing, the interest rate of which depends on the respective market conditions. If market rates have risen in the meantime, it may be expensive. The timely conclusion of a Bauspar contract can exclude this risk.
As part of the financial statements, the savings and loan contract stipulates what the future loan interest rate is. The agreement is binding, ie the building society can not change the interest rate later. Thus, home savings loans promise maximum security. Borrowers know exactly what rate they will pay later. The further interest rate development also no longer plays a role because the interest rate applies until the loan is fully repaid.
Beware of modern home savings loans
At least that’s how it used to be. In the meantime, more and more home savings solutions are appearing that are designed differently. More and more building societies are making their customers such loans palatable, which are also subject to a fixed interest rate. This means that the interest rate is only fixed for a temporary period, after which it requires follow-up financing.
Whether such solutions are attractive ultimately depends on the remaining debt. The higher it is rated, the less recommended such a loan. If absolute interest rate certainty is desired, the home savings loan should provide for a full repayment in conjunction with a fixed loan interest rate.