Interest rates for mortgage loans tripled from around 1 percent to over 3 percent in the first half of 2002 alone. It looks different with the building societies. Therefore, bauspar loans are again more favorable than bank loans. How building savers secure favorable credit conditions.
High costs for real estate, building materials and craftsmen's services as well as rising interest rates – the general conditions for real estate financing are deteriorating. Therefore, more and more people resort to a proven solution and secure themselves with a building savings contract. This means that both the savings interest rate and the subsequent loan interest rate are fixed for the entire term when the contract is concluded, even if the loan is not drawn down for another eight or ten years.
A tried and tested principle
Since the first building society was founded around 1775, the basic principle of building savings has hardly changed: If many save at the same time, individuals are more likely to be able to afford a property. All building society savers of a fund pay into a pot through which the deposits and withdrawals are processed. Some save credits, others take amounts as loans, unneeded savings deposits are safely invested by the building society.
The individual saver first determines a building savings amount. Then, during the savings phase, he accumulates a credit balance over several years by paying the contractually agreed standard savings contribution into the community pot every month. As soon as he has reached the minimum balance – depending on the tariff between 30 and 50 percent of the building savings sum – he can obtain a favorable loan for the saved balance. In order for the building savings contract to be ready for allocation, the defined target valuation figure must also be reached. It results from the savings of the bauspar customer and the already elapsed savings period. The interest rate in the savings phase is usually lower than usual in the market; in return, the saver later receives a loan with guaranteed conditions until the end of the term. After disbursement, the loan phase begins, in which building savers repay the loan installment by installment.
If you don't have time to save, you can take out a pre-financing or interim financing loan. It consists of a building savings contract and a repayment-free advance loan. The borrower thus initially pays only the interest and possibly a small repayment for the loan and saves in parallel in the building savings contract. When the latter is ready to be allocated, the bauspar sum is used to repay the pre-financing loan in one fell swoop. From this point on the house buyer only pays off the building society loan. In this way, rates are fixed for many years until the last installment is made.
Many advantages
In addition to interest rate security, building savings contracts offer several other advantages. They are particularly flexible: the amount of savings can be increased or decreased, and the tariff can be changed. The contract can be terminated or suspended. And in contrast to bank loans, unscheduled repayments of any amount are possible with a building society loan. In the case of bank loans, this is not allowed, only to a limited extent or exclusively against an interest surcharge.
If you manage to use a home loan to push the bank loan below 80 or even 60 percent of the value of the property, the interest rate on the loan is usually better. Unlike credit institutions, building societies do not charge an interest surcharge if the property is already encumbered by another loan that ranks first in the land register. The interest rate on the building society loan also applies to small amounts. This can be interesting for example with modernizations. Last but not least, building savings are subsidized by the state – with the housing subsidy increased in 2021, the employee savings allowance, and Riester. You can find out more on the LBS site under "Funding and Rewards". Here is also a funding calculator.
By the way, there is no obligation to accept the loan.
Advice
Home savings is not a very simple product, consisting of a bundle of conditions in the savings and loan phases: Acquisition and annual fees, credit and loan interest rates, allotment requirements, repayment options and much more. A key factor is the allocation. Ideally, it takes place when the saver needs the money for real estate purchase, construction, modernization or renovation. To achieve this, all parameters must be coordinated and the right tariff selected. For most building society savers, this can only be achieved with the help of good advice.