Want to avoid one or more loans
Hardly anyone in his life will be able to avoid taking out one or more loans, be it to finance his own house, the new car or the new kitchen. Loans have a not inconsiderable volume, particularly in the area of real estate financing. The APR of the loan is certainly the most meaningful condition when deciding on a particular loan.
In contrast to loans of smaller amounts, the interest rate of which is often determined by the borrower’s creditworthiness, the term of fixed interest and the mortgage lending rate play a role in real estate financing. The loan-to-value ratio indicates how high the share of the real estate loan is compared to the total investment amount.
The bank reserves this difference between the acquisition or production costs of the real estate and the loan amount as security for the granting of the real estate loan.
The lower the mortgage lending, the better the interest rate conditions that banks grant for real estate financing
Real estate loans are usually granted up to a lending rate of up to 80 percent. It is precisely in this area of debt financing that a certain amount of equity is required. The loan-to-value ratio is important because real assets are subject to different fluctuations in value and exploitation.
In addition, in the event of a non-performing loan, satisfaction from selling the property is only possible with a significant time delay. The lending rates are to be applied uniformly by the credit institutions, since the discounts are based on legal regulations. However, the lending ratios of the banks can still differentiate, only basic approaches are given, on the basis of which the credit institutions can calculate their lending ratios.
The determination methods vary depending on the bank, so that the level of the loan-to-value ratio is also not uniform. The borrower’s creditworthiness can vary in strength. The 80% loan-to-value ratio is probably only granted if the creditworthiness is flawless, and as part of the real loan, some banks will also only finance 60% of the loan-to-value ratio.
While the mortgage lending rates for real estate loans are still quite high, they are significantly lower for other properties, such as vehicles, machines and especially stocks. With these, the fluctuations in value fluctuate greatly and the decrease in value during the term of the loan is considerably greater.