
Buying a house, inflation, rising interest rates: how can I finance a house purchase in these times?
Looking at a loan term of ten years, the interest rates offered by most providers have tripled in some cases since the beginning of the year. The fixed interest rate is currently around 3.1 percent (as of July 2022). This also entails stricter bank requirements for obtaining financing for the property. Anyone with a negative SCHUFA entry further reduces their chances of obtaining financing. Real estate buyers should therefore be in a position to cover the high monthly costs of the credit or loan and, if possible, delete any negative SCHUFA entries.
The impact of inflation and high interest rates on follow-up financing
The new contract also brings new real estate interest rates for property owners. Those who took advantage of good conditions during the low-interest phase will now face higher interest rates than a few years ago. Restructuring debt to take advantage of better interest rates therefore makes little sense.
However, early follow-up financing, i.e., a forward loan, has the advantage of locking in the current interest rate before it rises further. The catch here is that this type of follow-up financing is more expensive than a normal construction loan. The reason: fees for early termination of the contract. Banks usually charge an early repayment penalty. Under certain circumstances, this can be circumvented by borrowers.
When it comes to further home financing, it is important not to accept the first offer from your bank, but to compare loans.
Improve your credit rating
If a better income is not in sight, you have little or no equity, and you cannot reduce your expenses any further, there are still ways to improve your creditworthiness:
- Pay bills on time
- Refinance other existing loans
- Do not live beyond your financial means (budget planning can help)
- Cancel unnecessary and unused bank cards and accounts
- Multiple credit or loan recipients
- Improve your SCHUFA score: delete negative entries (tip: request your SCHUFA report once a year and ask which entries can be deleted)
If high interest rates jeopardize further follow-up financing, meaning that the house can no longer be paid off, owners can get help from regional real estate professionals. Together, you can discuss individual solutions for the worst-case scenario before it comes to foreclosure.
Would you like to finance a property or find out what options you have with your property if your loan application is rejected? Then get in touch with us. We will be happy to advise you.
Notes
For reasons of better readability, the generic masculine form is used in this text. Female and other gender identities are expressly included insofar as this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific case.
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