Once the perfect investment property has been found, capital accumulation can often cost valuable time and potential profits. But what options are there if the equity capital is not sufficient or the house buyer does not want to use it for the purchase? You can find five alternative financing ideas here.
Often a financing only covers the purchase price of the property. When buying a house, however, additional costs are incurred, which represent an additional financial burden. These include, for example, the broker’s commission, real estate transfer tax or notary fees, which can quickly increase the total costs by several thousand euros. If the borrower has a good credit rating, he may be able to finance these additional costs through the loan. This has the advantage that the otherwise one-off but high additional costs are spread over a longer repayment period. Some financial advisors such as our experts at Engel & Völkers Finance have even specialised in brokering loans only from credit institutions that offer this option.
Before applying for financing, borrowers without equity capital should carefully check how high the monthly burden of the loan will be and put this in relation to their own income. This is particularly important in the case of full financing, as the interest and repayment rates may be higher than in the case of equity financing. The financing consultant helps to calculate these monthly costs and can then arrange the appropriate loan amount.
For financial bottlenecks in full financing, interim financing is a suitable interim solution. This can make sense, for example, if the real estate buyer still lives on his old property but is about to buy a new one: the money from the sale is not yet available to finance the purchase of the new property. In this case, the interim loan provides a remedy thanks to its variable term. However, such loans typically carry significantly higher interest rates. Whether the interim financing is worthwhile should therefore be discussed in advance with the financing consultant.
In order to insure financing without equity, it may be worthwhile for the borrower to take out an appropriate insurance policy, which will take effect in the event of insolvency. This can take the form of term life insurance or occupational disability insurance, for example. Of course, it should be checked in advance whether insurance is necessary at all.
Another method used to insure real estate financing without equity is to conclude a mortgage savings plan. If the credit rating allows, the borrower can create monthly reserves by investing in a mortgage savings plan, which can be advantageous in case of unforeseen additional costs. In such situations, mortgage savings plans have the advantage that they are usually subject to a favourable interest rate.
As a general rule: real estate financing without equity should always be reviewed by an experienced financing expert. Only in this way can borrowers be sure that they are getting the right loan under the right conditions. Our experts from Engel & Völkers Finance will be happy to advise you in this regard and will find the right financing for you from more than 450 credit institutions. We are looking forward to hearing from you.