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Final loan: financing without repayment
Final loan: financing without repayment

Video: Final loan: financing without repayment

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The final loan is one of the more expensive forms of credit. In certain cases, it may still be worth taking out such a repayment-free loan. This applies in particular if you have a home savings contract or would like to conclude it.

Table of contents Table of contents Final loan: Clever financing of house construction or renovation

  • What is a final loan?
  • When does a final loan make sense?
  • Final loan in connection with a building loan contract
  • Which grants are possible?
  • Final loan and KfW funding
  • Tax advantages for a rented property
  • Overview of advantages and disadvantages
  • When is what paid? Sample calculations

Table of contents Table of contents Final loan: Clever financing of house construction or renovation

  • What is a final loan?
  • When does a final loan make sense?
  • Final loan in connection with a building loan contract
  • Which grants are possible?
  • Final loan and KfW funding
  • Tax advantages for a rented property
  • Overview of advantages and disadvantages
  • When is what paid? Sample calculations

What is a final loan?

A final loan is a special type of loan in which the full repayment of the borrowed amount is only due at the end of the loan term.

During the term of the loan, the borrower does not have to make any repayments on the final loan. In this point, for example, it differs from an annuity loan. The borrower only pays the interest on the loan to the financing bank on a monthly basis. The amount of interest can be fixed or variable.

Since there is no repayment over the entire term of the loan, one also speaks in connection with the final loan as a repayment-free loan, a repayment-free loan or a maturity loan.

Due to the lack of repayment, a final loan represents a considerable risk for the financing bank. As a rule, credit institutions therefore hedge themselves by significantly higher lending rates.

Keine Tilgung während der Kreditlaufzeit, dafür hohe Kreditzinsen
Keine Tilgung während der Kreditlaufzeit, dafür hohe Kreditzinsen

Although the borrower does not have to make any repayment during the term of the loan, high interest is charged on the final loan.

Photo: iStock / marchmeena29

When does a final loan make sense?

A final loan is worthwhile for the borrower if, due to the non-repayment rates, he is able to invest his money in a different way or to avoid double charges. The investment forms can be stock transactions as well as monthly contributions to life insurance or a home savings contract.

Since the interest costs for a maturity loan are usually higher than, for example, an annuity loan, it is not worth it for everyone in the end. An exact calculation of the costs makes sense in any case, whereby the possible funding (see below) should also be included.

Final loan in connection with a building loan contract

The connection of a final loan with a building society savings contract is particularly useful if a property is to be built or renovated with the money from the loan. Since there are no repayment installments, this form of mortgage lending allows the borrower to pay significantly larger sums into the contract each month and to accumulate a higher amount of money than would be possible with simultaneous repayment. If the term of the loan ends and it is finally due for repayment, the entire amount of the mortgage loan can ideally be redeemed with the money from the building society account.

Good to know: To secure the loan, banks can sometimes assign the building society contract.

Final loan and home loan contract: what should be considered?

If the final loan is coupled with a home savings contract, it is important that the home savings contract is ready for allocation when the loan repayment is due. Then the amount to be repaid can easily be raised from the contract.

Ideally, you should conclude the final loan together with the home loan contract. Then not only the time of payment but also the amount of the home savings can be matched exactly to the loan amount and the term, so that when the repayment is due, the allotted home savings sum covers all liabilities. Example: If a final loan of EUR 10, 000 is taken out, the home savings sum should also be set to this amount.

Tilgung des endfälligen Darlehens mit einem Bausparvertrag
Tilgung des endfälligen Darlehens mit einem Bausparvertrag

It may make sense to couple the final loan with a home loan contract. Then the loan due can be repaid with the home savings amount paid out.

Photo: iStock / marchmeena29

Which grants are possible?

The great advantage for building society savers with a repayment-free loan is that subsidies from the state can be used for residential use of the accumulated money. This includes the housing construction premium as well as the employee savings allowance or the housing subsidy.

For some of these grants, the amount depends on the amounts that the home saver pays monthly or over the year. Since the borrower has more financial scope with a final loan, he can pay in more and thus secure the maximum possible support from the state. How much funding can be achieved, for example in the form of a housing premium, is easy to determine: How to calculate the amount of the housing premium.

Final loan and KfW funding

If a property is built, bought or refurbished that is eligible for KfW funding, the loan granted by KfW can also be concluded as a maturity loan. Here, too, it makes sense to combine it with a home loan contract so that the loan amount can be raised without any problems when it is due.

Final loan: tax advantages for a rented property

Final loans also offer the chance of tax savings: is a repayment-free loan taken out in order to finance the construction of a property that is not occupied but rented? Then the monthly interest payments can be recognized in the tax return. If, on the other hand, the property is occupied by the borrower himself, the interest payments are not tax-deductible, so an annuity loan is generally recommended here.

endfälliges Darlehen Haus vermieten
endfälliges Darlehen Haus vermieten

A final loan is particularly worthwhile when it comes to the construction financing of a rental apartment: Here, the monthly interest payments are tax-deductible!

Photo: iStock / fizkes

Final loan: advantages and disadvantages at a glance

There is no general answer to whether an individual loan is the best solution for home financing. A look at the advantages and disadvantages helps.

benefits

  • low financial burden and therefore greater flexibility due to unpaid repayment rates compared to an annuity loan
  • suitable interim solution until the home loan is allocated
  • fixed or variable interest rates
  • Combination with building society savings and KfW funding possible
  • Tax deductibility of interest on rented property

disadvantage

  • significantly higher interest rates compared to an annuity loan
  • under certain circumstances, different maturities of loan repayment and allocation of the building society contract
  • Investing the available money with a higher return than the interest cost of the loan is only possible with a high level of technical expertise

When is what paid? Sample final loan calculations

Two examples are intended to show what the payment obligations for a final loan look like and what interest costs are to be expected when.

Final loan example 1

Mr. Muster has taken out a final loan of EUR 250, 000 for the financing of a property purchase. The term of the loan is seven years at an interest rate of five percent.

Year of

running time

Redemption

interest

in the year

Overall rate

in the year

0 €

€ 12, 500

€ 12, 500

2nd

0 €

€ 12, 500

€ 12, 500

3rd

0 €

€ 12, 500

€ 12, 500

4th

0 €

€ 12, 500

€ 12, 500

0 €

€ 12, 500

€ 12, 500

0 €

€ 12, 500

€ 12, 500

€ 250, 000

€ 12, 500

€ 262, 500

Total:

€ 250, 000

€ 87, 500

€ 337, 500

Mr. Muster has to pay interest of 12, 500 euros annually to the financing bank. This results in interest costs for building finance totaling EUR 87, 500. In addition, the loan is due for repayment in the seventh year. In the end, Mr. Muster must then repay the loan amount of EUR 250, 000 to the bank in addition to the interest payment.

Final loan example 2

Ms. Exempel wants to make the entire house age-appropriate and needs funding. For a barrier-free bathroom, she takes out a maturity loan of 10, 000 euros. Here, too, the term is seven years at an interest rate of five percent.

Year of

running time

Redemption

interest

Overall rate

0 €

€ 500

€ 500

2nd

0 €

€ 500

€ 500

3rd

0 €

€ 500

€ 500

4th

0 €

€ 500

€ 500

0 €

€ 500

€ 500

0 €

€ 500

€ 500

€ 10, 000

€ 500

€ 10, 500

Total:

€ 10, 000

€ 3, 500

€ 13, 500

Ms. Exempel has to pay 500 euros in interest annually, and in the seventh year she has to raise the additional loan amount of 10, 000 euros. Financing costs them a total of 3, 500 euros in the end.

Nadine Kleber

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