Construction financing: building savings loan or annuity loan

Hello everyone..

Following question:

I am faced with the decision of financing. I now have the choice between financing through a building society, or a building savings loan, and the "normal" annuity loan.

Can someone please explain the concrete difference to me and maybe give a tip on which of the two is better??

I know, for example, that with a building savings loan payments are made into a building savings contract, which later repays the loan amount. If that is correct..

Many thanks for your help

Krodea

Hello,

with an annuity loan, for example, you regularly repay 1%. This means the outstanding loan decreases month by month and you pay less interest each month. Since your monthly rate remains the same, your repayment portion increases. After the first 10 years, you will have repaid about 13% of the loan.

With a building savings-backed financing, you pay interest for the entire first 10 years on the full loan amount and save into the building savings contract as a repayment substitute. After the first 10 years, a partial repayment of about 30% of the loan takes place from the building savings contract. Of these 30%, about half is building savings credit balance, the rest is a building savings loan.

I recommend to my clients an annuity loan and, on a voluntary basis, saving into a building savings contract alongside it, in order to make an additional repayment after the initial fixed interest period and to minimize the interest rate risk.

The advantage is that you can determine the amount and regularity of your savings contributions yourself and you also always have liquid funds available for unforeseen expenses.

Best regards

M. Thiemann