Who would not like to? Holding the keys to your own property in your hand and being proud of yourself for finally being able to fulfill your dream. But before this can happen, the property has to be financed and paid off. But there are some risks here that should not be underestimated.
Someone who buys a property first needs money for the construction financing. But many providers exploit the ignorance of customers and offer them bad deals. These are not saved by the customer, but the construction financiers earn a golden nose. That's why it's important to plan well in advance and choose secure financing.
It is not uncommon to accept an offer from a bad or dubious loan broker. Furthermore, some did not pay proper attention to the conditions and take out too expensive construction financing loan. That's why you have to look carefully at what you do when financing a construction project. After all, we are talking about large sums of money.
The risks associated with the interest on the loan
The interest of the loan should be looked at carefully. Are the indicated interest rates the effective annual interest rates? Den only the effective annual interest rate indicates the total cost of the loan. All other interest rates do not include all applicable fees.
Sometimes effective interest rates are misstated by construction finance providers when viewed from the customer's perspective. You calculate the APR for the full term of the loan, rather than for the fixed-rate term. But after the expiration of the fixed interest period, the loan gets a new interest rate. Thus the indicated effective interest rate of the financiers is no longer correct.
Some financiers also give an interest rate in which the processing costs, commissions, administrative costs and compound interest are not even taken into account. If one does not recalculate it then itself, the offer looks allegedly good.
Especially inexperienced people fall for it and possibly take out a too expensive loan. That is why you have to look carefully. If a loan does not indicate an annual percentage rate of charge, it is better not to take out the loan and to look for another financier.
danger with the financing sum
The financiers, who can resent them, would like to sell and earn money. They look, that the construction financing as fast as possible stands. Whether it is good for the customer is secondary for some financiers.
The main thing is that the money lender can pay back the installments on the loan. In this case, no attention is paid to whether the financing amount is sufficiently high. That is why you always have to check it yourself.
Dubious offers of the financiers
Banks in particular also have real estate for sale themselves. Watch out if the bank advisor tries to talk you into one of these properties during loan negotiations. What is also common is that insurance must be proposed or even chosen as a condition for financing.
If that is the case, the bank or the financier acts only in self-interest. These products are mostly rip-offs of the finest kind and have only one goal: to put money in the financier's pocket.
Nasty tricks used by financiers
At the beginning a loan is offered at a low interest rate. If the loan agreement signed, a higher interest rate will be charged. As a justification it is said that the conditions have changed because of time delay.
Suddenly the financier would like to have also still high fees as for example conclusion costs, in addition to the agreed upon interest rate. Financiers also like to charge high fees when buying used property. This is, for example, a fee for an appraiser These machinations are all illegal, but are simply accepted by many of those affected.
Self-inflicted disadvantages
When interest rates are favorable, many borrowers take on loans. If the interest rates are then not fixed long enough and a low repayment rate is chosen, they often get into payment difficulties when interest rates rise later on.
Often the required loan amount is calculated too low. If then a subsequent financing is needed it is usually expensive.