Does it make sense to get an overview of the market for a real estate loan yourself or is a financial intermediary actually the better way to go?? Nuremberg-based financing expert Helge-Jurgen Grundmann from baugeld& more finance switching GmbH explains in the interview, how respectable finance switching functions and where their advantages lie.
Mr. Grundmann, as a financial intermediary you are the link between the bank and the builder-owner. The alternative is to go directly to the bank. What are the advantages of a financial intermediary?
Helge-Jurgen Grundmann: To get an overview of the market, you would have to visit a large number of banks – including providers without a branch network – hold discussions and obtain offers. Even more time-consuming and challenging would be the comparison of the offers and the evaluation of the different additional conditions, such as unscheduled repayment, redemption change and commitment interest rate. The advantage of the financial mediator is that he already has this market overview. From a large number of offers, it not only selects the lowest-interest provider, but also takes into account the personal situation of the applicant in terms of offer conditions and guidelines of the lenders. An experienced financial intermediary also checks possible state subsidies and assists with the application process. This is a serious difference with banks. Once the right provider has been found, the next step is for a financial advisor to work with the customer to obtain the necessary financing documents and submit them to the bank in accordance with the requirements. In addition, he keeps all parties involved, such as brokers or developers, up to date on the processing status and accompanies the customer even after approval in the disbursement phase. This aspect should not be neglected, as the various financing modules must be called up in a coordinated manner in order to ensure a smooth process up to the time of moving in.
Many consumers shy away from involving a financial intermediary. They fear high commissions, which destroy a possible saving under the line again. To what extent can you address these concerns?
Helge-Jurgen Grundmann: A reputable financial broker informs his customers in advance how he will be remunerated. It is important to know that the customer is not remunerated, but rather the bank pays a commission. This is already priced into the conditions – regardless of whether the customer inquires directly or through an intermediary. Since the customer does not take up personnel and time-intensive advisory service in the bank in advance, the commission goes to the mediator. The exact height is communicated over the "European standardized information sheet. As good construction financing brokers, we are also constantly negotiating special conditions in the interest of the customer in order to compensate for market changes. We have made special agreements with some of our banking partners, which we pass on to our customers for certain construction projects. This applies to new construction, purchase and follow-up financing.
Which hurdles and obstacles do prospective real estate owners most often have to deal with??
Helge-Jurgen Grundmann: "Purchase decisions are currently most frequently influenced by further price increases or sharply rising construction costs. These are also due to requirements of the climate policy. In addition, there are longer and longer periods between the purchase and completion of new buildings. When buying an existing property as an alternative, it should be carefully examined which renovation costs are pending for the moment and for the future. To avoid unpleasant surprises, professional advice is highly recommended. As well as early financing planning, for example in the form of savings contracts. When buying a new building, 5.5 percent incidental costs must be paid; when buying an existing property, up to almost 5 percent brokerage commission must be added. This is not easy to manage, even with a good income. Sometimes there is a lack of the necessary equity to at least cover the ancillary costs, which is essential with most financing providers. Too little equity is therefore a reason for many prospective buyers to stay in renting. Due to the residential real estate credit directive, the affordability of the financing must be checked after the interest rate lock-in period has expired and at retirement age. A shortfall in income can lead to rejection if the wrong application is made. The risks of unemployment, occupational disability and death should also be discussed when considering the amount of debt and loan installments, and a hedge should be taken out. A thorough consideration and clarification of all these issues and hurdles makes perfect sense as part of sustainable financing advice.
What are the arguments for financing now?
Helge-Jurgen Grundmann: Despite possible government incentive measures, rents will remain at a high level, as demand in the metropolitan region remains strained due to a growing number of households. Therefore, it is currently quite sensible to calculate in which order of magnitude a real estate financing would be feasible. Because the interest portion of the loan installment is usually far below the rent to be paid. The interest rate environment remains extremely attractive. Interest rate hedges with up to 30 years fixed offer planning security over a long period of time. Also the state helps with the building or purchase with promotion loans and subsidies, that can be loans of the BayernLabo for families, the KfW energy programs, the building child benefit of the federation and the Free State of Bavaria or the Bavarian home owner allowance. However, in order to receive these subsidies, the financial plan must be submitted by 31 December of the following year.12.2020 are purchased.
Mr. Grundmann, thank you for the interview!