Home loan and savings contract
What you need to know about a home loan and savings contract!
The home loan and savings contract is one of the classics among construction financing options. Unfortunately, it is somewhat outdated and, given the current market conditions, is more suitable for saving than for drawing down and investing.
This is how it works: There is a savings phase in which you can decide how much money you want to deposit. Once you have saved up the minimum balance and have an appropriate rating and credit rating, the loan phase continues. In the end, it is a classic annuity loan – except that your credit balance is offset against the amount of the loan.
By the way, you can only use the loan from the building savings contract for investments for residential purposes.
If you would like to know more about the different types of loans, listen to our podcast episode "Alles Annuitätendarlehen, oder was?".
Note: German audio only
Key figures for home loan and savings contracts: a comprehensive overview
A home loan and savings contract is often seen as a kind of savings book that is specifically intended for financing your own home at a later date. You pay in money regularly and thus secure the possibility of obtaining a loan at a predetermined and often more favorable interest rate at a fixed point in time. In principle, this system works as planned, but the originally agreed interest rate may well become less attractive over time, especially if the general interest rate level changes significantly.
Factors influencing building society conditions
The specific conditions of a home loan and savings contract depend on various factors:
Building society tariffs:
There are differences primarily in the interest rates for credit balances and loans, the conclusion and administration fees as well as the savings and repayment conditions.
Amount of savings contributions and contract size:
These influence the term and availability of the loan. Larger home loan and savings amounts can lead to more favorable interest rates, but require higher savings contributions.
Market interest rates:
The current interest rate level plays an important role, as building societies adjust their conditions accordingly.
Personal creditworthiness:
Creditworthiness can also influence the conditions, despite the equity built up through savings.
The role of the valuation figure
The valuation figure is an essential component of building society savings. It shows how far a home loan saver has progressed with their savings goal. This figure increases with the amount paid in and the duration of the savings phase. A high score improves your position in the "queue" for a loan, which means that you will be approved more quickly if your score is high.
Possibilities for using the loan
A home loan and savings contract not only allows you to purchase a property, but also to build, renovate or modernize residential property. The funds can also be used to purchase a plot of land or to pay off real estate loans. The repayment of the loan can be flexible, often similar to an annuity loan, whereby the monthly charge remains the same.
Termination and payout of the contract
A building society contract ready for allocation gives the saver the right to dispose of the saved credit balance and the loan. It is possible to have only the credit balance paid out and waive the loan. However, this may incur costs, depending on the terms of the contract.
