Lenders’ offers can vary widely in price. For this reason, home builders and property buyers should also compare different offers in a low-interest phase, as is currently the case. This takes some effort, but it is worth the effort, as it can save thousands of USD.
Compare standard conditions
The first step on the way to a cheap loan is to get an overview of the providers with the best standard conditions. Current comparison lists on the Internet or in relevant magazines are helpful, but banks also provide such information by telephone. On the basis of the borrowing rate at 100 percent payment and the effective interest rate for the interest rate fixing periods in question, the tendentially cheapest providers can be filtered out. Some of the eligible donors now need to get non-binding offers.
Make a non-binding loan request
The credit institutions do not issue the standard conditions to all customers. Banks first check the creditworthiness of the prospective loaner on the basis of their information on income and financial circumstances, planned share of equity, profession, duration of employment relationship, etc. The interest then offered may well be above or below the interest rate with which the financial institution advertises.
Only when the customer has made a non-binding loan request and submitted all the information or documents necessary for the credit check does he receive a meaningful offer from the bank, which he can compare with other offers. This so-called provisional loan commitment is either subject to change or the specified conditions only apply for a certain period.
The effective annual interest rate and the remaining debt at the end of the fixed interest period are decisive for the comparison of the various loan commitments. The lower these values are, the cheaper the offer is. Using a repayment plan from the provider, the remaining debt can be determined at the end of the specified period.
Important: However, the prospective customer can only compare offers with the same general conditions, in which, in addition to the fixed interest period, the repayment rate, the amount of the installment, the payment dates and the ancillary costs not included in the effective interest rate are the same.
Negotiate with the bank
A preliminary loan approval does not mean that the loan will be granted on the terms specified. Now that the cheapest offer has emerged, customers have the opportunity to underline their creditworthiness in a credit discussion with the bank using well-prepared documents and to negotiate the interest rate by a few tenths of a percent.
If the bank does not give in on the interest, the prospective customer should try to reduce the ancillary costs such as commitment interest or partial payment surcharges to zero or negotiate free special repayments. If the loan is above a loan-to-value ratio of 60 percent, it could also be a negotiation goal to have the total interest rate granted on a senior loan (up to a loan-to-value ratio of up to 60 percent).
Alternative brokers of construction money
If you shy away from the described procedure, you can also contact building brokers on the Internet. The brokers specializing in real estate financing work with a large number of banks, savings banks and insurance companies and look for the cheapest offer for those interested in credit.
Since they relieve the banks of a lot of work, these loans are usually even a lot cheaper than those made directly with the provider. The customer submits his loan request online to the agent, sends him all the relevant documents and then receives an offer. However, he concludes the actual loan agreement with the lending bank.