How to Compare Financing Offers
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We all know how overwhelming mortgages can be: there are endless calculations, numbers, terms, and infinite paperwork!
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When you're comparing mortgage offers, don't get too fixated on the interest rate. It's essential, for sure, but it's not the whole story. Think of it like buying a car – you don't just look at the price tag; you check out the features too.
There are 5 factors you should always take into consideration when comparing mortgage offers:
The interest rate itself. In a nutshell, it's the fee the bank charges when you borrow money. The interest rate you receive depends on the bank, the current key interest rates, your creditworthiness, and the property value. The bank considers all of that to minimize the risk of loan default.
The amortization rate. This is the percentage of the loan amount that you repay monthly. In Germany, it's usually between 1-3%.
These two rates combined make up your monthly payment. Always make sure that you have enough financial means to pay the monthly installment.
The next thing you should consider is if you want to make extra payments to repay your loan faster. Bear in mind that the banks sometimes charge an additional fee to allow this, resulting in a higher interest rate.
The down payment. In Germany, banks may finance 100% of the purchase price, but not out of kindness; the higher the percentage you borrow, the higher the interest rate. From our own experience, a 90% financing already offers a great reduction in the interest rate.
Our golden rule is to take your time to ask questions, compare offers, and find a partner who can assist you through the whole process.
Here are the terms in the German translation:
**Zinsen = Interest rate
Tilgungssatz = Repayment rate or amortization rate
Sondertilgung = Extra payment **
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