Complete guide about Important of financing plan: Financing plans support investors in planning a real estate acquisition(investment real estate). The focus is on checking the profitability of a loan.
The financing plan is one of the most important tools in planning major investments. It compares the available funds with the costs incurred. By listing all the important details, you minimize the risk of facing unexpected costs in the end. The aim is to calculate the correct amount of funding. As mentioned above, available equity is offset against the costs incurred in order to finally fill the financing gap. On the basis of this, a decision can be made on the viability of the loan.
It is important to note that the borrower is able to make the planned repayments including interest. In addition, consideration should be given to the possibility of special repayments, if this is possible. Banks also use financing plans. They often simplify loan commitments and significantly reduce the risk of default simplistic. A good financing plan can thus also obtain better interest rates in negotiations with various credit institutions.
As mentioned above, a financing plan compares equity with the cost of buying real estate. All costs that cannot be covered by equity are the financing needs of the investor. In addition to savings, equity also includes income and owner-octopus services by the buyer. All self-performed renovations can count as their own contribution. For example, laying a floor covering.
The budget provides an insight into all the borrower’s income and expenditure. Monthly income from salaries is offset against the running costs of the budget. These include rental costs, electricity, food costs (extrapolated to the personal household) and insurance. After all costs have been deducted from the income, one gets a monthly, freely available, room for manoeuvre. Taking into account a small buffer, this margin of manoeuvre represents the possibility of repayment of loans in the form of loan instalments.
Do you have any questions or would like to test the real estate franchise?
The next important point in the preparation of a financing plan is equity. All available funds of the investor are taken into account here. This includes inheritances, savings, overdue building savers and, as already mentioned, recoverable own services by the borrower. Existing equity, in addition to the amount of financing, also reduces the interest rate offered by the banks. For example, loans up to 40 of the purchase price of the property will be subject to a lower interest rate than loans that are higher. Another positive aspect of equity is risk reduction during the loan term. The higher the funds available, the lower the loan rate to be paid. Banks often reward this with lower costs. Nevertheless, as an investor, you should not contribute all the equity capital to the purchase of the property. A sufficient reserve provides protection against unexpected costs, such as a defective washing machine.
The E1 Investments concept offers a proven system for the solid development of a business as a broker and owner of a real estate business. E1 Real Estate has the infrastructure and operating systems that enable us to offer first-class services with a team of brokers. You are investing in the market of the future.
Many details must be taken into account when drawing up a financing plan. Since these quickly become confusing for many laypeople, it is advisable to consider advice from a financial expert. Most borrowers rely on the bank adviser. If you want to be on the safe side, however, you should get several financing plans from different agencies. This way you can knock out the best price/performance ratio. As a financial professional, you can also create a financing plan for yourself.
This will take better account of one’s own wishes and identify the available resources first-hand. Nevertheless, for safety, one should have an expert look over it again, so that no important aspect such as the amount of the repayment rate is miscalculated. Among other things, online calculators provide help with the creation. You can use it to map the budget accounting and cost determination. However, when it comes to creating a financing plan taking into account all the important factors, there is no way around self-research or professional advice.
Once the budget has been drawn up and equity capital is determined, all costs must now be identified. On the basis of these figures, credit requirements are determined at the end.
But beware: it is not only the purchase price of the property that represents all costs associated with the purchase. There are considerable incidental costs when buying a house. This includes notary costs, brokerage costs, fees at the Land Registry Office, land transfer tax, etc. Once all costs have been recognised, the financing requirements arise after deduction of equity capital. In this way, a rough assessment of the economic viability of the loan can be made. For this purpose, the resulting financing needs are divided by a realistic duration of about 30 years. The result is divided by 12 by calculating a guideline for the monthly repayment, without taking into account the interest to be paid. If the amount calculated is already above the available funds, it looks rather bad for a loan permit.
Before completing a financing, you should make a plan as an investor as to how long the repayment of the loan can take maximum. Financial experts recommend a term up to a maximum of retirement. In this way, the loss of creditworthness due to too low pension income is prevented. Of course, the timing of the start of financing also plays a part in this decision.
Banks also take into account the age of their customers and try to keep maturities as low as possible as investors age. Older borrowers can also have higher repayment rates due to higher incomes.
Government support in the form of loans usually has much lower interest rates. For this reason, construction finance is not just a credit from a single credit institution. A common form is the combination of a main loan from the bank, a building-saving loan from the building society and a promotional loan. For this reason, it is important to consider the possibility of state support when drawing up a financing plan. Those who build particularly energy-efficient energy efficiency are usually rewarded by the state with cheap loans. The contact person in this case is the Kreditanstalt für Wiederaufbau (KFW). The state-owned credit institution offers considerable subsidies, especially for new buildings. In addition, it is often worthwhile to ask the city or municipality, which often offer different support programs. Another alternative is the residential giant. The capital consisting of a residential giant can be included in a construction financing in the form of equity capital.
The higher the repayment, the faster you are debt-free again. However, it should not be forgotten that this also increases the monthly burden. Often, however, the bank takes the decision on the correct level of tincy. It is not uncommon to estimate a repayment rate of at least 2-3 percent. In principle, it is important to plan the financing in such a way that the borrower gets through well with his financial resources even under the burden of a loan rate.
As a borrower, it is also advisable to have a repayment plan handed over by the bank. All monthly instalments are broken down during the loan term. The interest and repayment shares associated with each instalment payment can also be read on this. The repayment plan is particularly helpful in planning follow-up financing or debt restructuring. This is the way to determine the remaining loan that is still outstanding. And this, in turn, reveals the amount of loans needed for follow-up financing or debt restructuring.
The most common variant of construction financing is the annuity loan with subsequent follow-up financing. Due to the constant monthly instalments, the negative interest rate to be paid decreases at the same time as the amount of credit falls. This, in turn, benefits the repayment and causes it to rise continuously. In addition to the classic, there are also other possibilities to trade a construction financing. The greatest security is provided by the full-payer loan. Here, the complete financing is planned up to the debt-free, without having to accept follow-up financing. On the other hand, if you are very willing to take risks, you can take a look at loans with a variable interest rate. In this variant, the interest rate of the loan increases or decreases, depending on the current market situation. Associated with this, however, the monthly repayment rate also increases or falls, which makes sensible planning very difficult.
Probably the most popular construction financing is the combined loan, consisting of annuity loans, building-saving loans and a promotional loan. In this way, financing with little equity can often be well-received. Depending on the type of loan, the customer can then choose an optional fixed interest rate. This is particularly worthwhile if higher interest rates are to be expected in the future, but these are currently low. This allows customers to secure the low interest rate over a term of 5-15 years and saves additional costs in the event of a rate hike during the loan term.
With just one shop, you’re in the fast lane! Get in touch now!
Real estate prices analysis for 80 locations throughout Germany
E1 Holding offers location analysis for real estate for almost 100 cities nationwide in all federal states. Our well-trained experts for real estate and investments as well as off-market real estate in various locations and sizes take a professional and authentic look at the real estate market at the respective location. In doing so, we determine realistic and continuously updated real estate prices depending on the market situation as well as a corresponding real estate forecast. We are constantly expanding the list of alphabetically ordered locations and intensively expanding the data base for more and more cities. In addition to investors and investors with budgets of all sizes, our nationwide location analyses are also valuable for housebuilders when deciding on a location. Click here
Stay up to date
Agency law from December 2020 What do real estate agents have to pay attention to from 23.12.2020? For information for our brokers and E1 licensees: Shortly before Christmas, there was a change in the brokercommission commission: the new law on brokerage commission from 23 December 2020 was already adopted by the German Bundestag in June
E1 Holding expands with 3 further Locations 2 x Berlin and 1x Cologne E1 Holding expands with three other locations Despite Corona, the real estate market is booming, and E1 Holding continues to grow successfully. In Germany, three new locations are now added to the existing 43 locations. Two of them are located in Berlin,
Topic End-of-year business in real estate End-of-year business real estate End-of-year business real estate – High Noon for real estate agents, investors and property owners It is well known that, in terms of average annual turnover, most transactions take place on the real estate market around the turn of the year. This applies to both
Real estate bubble Germany Threatens a Massive Crash? Property prices in Germany have increased significantly in recent years. After the global housing crisis just over a decade ago, fears are once again being raised that there could be a housing bubble in Germany. Experts warn that in many regions of our country, house and condominium
When do real estate prices fall? The real estate market follows different rules The real estate market follows different rules from the markets of other products. Who simply refers to the law of supply and demand in response to the question “When do real estate prices fall?” definitely falls short. For example, the real estate
Find real estate agents A small detached house Buy or sell a small detached house or condominium – the easiest and safest way to do this is through the mediation of a local real estate agent. You can find the best real estate agent if you make a thorough comparison in advance. Check (,) the
Successful even in times of crisis with real estate The Corona crisis has The Corona crisis has long since reached the real estate market. This raises the interesting question of whether a real estate agent or a real estate investor is actually one of the winners or the losers of this crisis. Surely one or
Investors are looking for real estate like never before! It’s not a new insight from the Corona Crisis that investors flee in times of crisis in tangible assets such as real estate. This is no different during the Corona crisis. However, as a real estate owner, real estate investor, or real estate agent, you should
Will the German Property Market Sink or Swim during the COVID-19 Pandemic? The COVID-19 crisis has come as a shock to global economies. In Germany, the pandemic has had a devastating impact on the economy, and no sector is left untouched. Even real estate, which is usually safe from market fluctuations, is experiencing instability due
E1 Plus! Access to off-market large-scale properties around the globe – with no obligations. Match it!
