What factors influence mortgage rates actually? The mortgage rates which homeowners have to pay at German banks have reached a very low level. The reason for this is primarily the low interest rate, which is still at a historic low of only 0.5%. You can check the mortgage rates on Todays Mortgage Rates website.

In some cases, customers only have to pay interest of less than two percent, although it should be noted that there are various influencing factors that ultimately determine the respective interest rate. It is therefore by no means the case that every borrower can expect an extremely favorable interest rate, but it depends on various aspects, which mortgage rate the respective bank ultimately sets.

The existing equity as a significant factor

If banks offer mortgage rates below two percent today, then in most cases they automatically assume that the client can contribute a certain amount of equity to the financing. In a full financing, in which the borrower so the entire amount required in the form of a bank loan has to raise, there are only rarely such very favorable interest rates. Many banks require an equity ratio between 15 and 25 percent if the customer wants to have a very favorable mortgage rate. The reason is that mortgage lending with existing equity is considered by banks to be more stable than when fully funded. The differences between full financing and equity financing can amount to between 0.5 and 1.5 percent at the interest rate.

The credit rating also affects mortgage rates

In addition to the existing equity, creditworthiness is also an important factor influencing the amount of mortgage interest payable. The Bank derives the creditworthiness of the bank primarily from the entries in the SCHUFA as well as from the existing income. Those who achieve clean SCHUFA information and average or above-average income are considered by the banks to be extremely creditworthy in terms of creditworthiness.

If, on the other hand, there is still little freely disposable income or even a negative entry in the SCHUFA, almost all banks demand a significantly higher interest rate to compensate for the increased risk, if a construction loan is ever granted. Ultimately, there can be a difference of up to two percent between a customer with a good credit rating and a rather mediocre credit rating in terms of the amount of mortgage interest payable.

Fixed interest rate or variable interest rate on construction loan

The type of interest rate also has a significant impact on the level of mortgage rates. The type of interest rate formation primarily means whether the customer decides on a variable interest rate or a fixed interest rate. Of course, with the mortgage rates currently very low, most banks would have liked the client to choose a variable interest rate, which could then be adjusted for rate hikes. For the customer, of course, it is currently much more advantageous to opt for the longest possible fixed interest rate.

Therefore, the current situation is that you get the cheapest mortgage rates with a variable interest rate, while the interest rates get higher, the longer the client wants to have them fixed. Thus, for example, for a home loan with a fixed interest rate of five years , the borrower pays an interest rate of, for example, 2.2 percent, while the same bank would require an interest rate of, for example, 3.5 percent for a fixed interest rate over 15 years.

So for all home builders looking to take out a mortgage loan in the near future, it is important to know what factors can affect mortgage rates.

First-time home buyers can be understandably uncertain or confused as to what steps they should take when it comes to purchasing their dream home. But if you’re a first-time home buyer, you simply need the right information to help you along your way. So, what can you expect when you are planning to buy a home and are thinking of getting a mortgage? Here’s what you need to know.

The deposit

The deposit you can save or borrow will be crucial since it will affect the kind of mortgage deal you will get, how much you will have to repay every month and the amount of interest which will be charged to you with your mortgage. You need to make sure that you already have a deposit before you begin checking out different properties. In general, you need about 5% to 20% of the total cost of the property you want. For instance, if you are interested in buying property worth £150,000, you would need to save a minimum of £7500 in order to come up to 5% of the property’s value. If you can, you should save more than 5% – if you have more than 5%, you will have better access to a broader selection of more affordable mortgage products.

The costs

The cost of purchasing property does not just end with the deposit. Far from it. There are other costs you need to consider, and you need to have the budget for this as well. These costs include the survey cost, the fee of the solicitor, the cost of building insurance, the mortgage arrangement fee and the valuation fee, and other costs such as decorating and furnishing expenses.

The repayments

You should carefully work out how much you can really afford to borrow when it comes to your mortgage, as this will affect how much you have to pay every month. Make a list of your expenses and your income and calculate how much you can afford to pay each and every month. You should also think about possible situations in the future, such as if you make a change in career, if you become redundant in your job, if you become ill, or if you decide to have children. Will you be able to pay your monthly mortgage bill then? It would actually be a good idea to make a plan for this, such as trying to save enough money to last you for 3 to 6 months if such situations arise.

The mortgage

There are definitely a lot of mortgage deals around, and this is where it can actually get a bit confusing. Your best bet would be to speak to a mortgage expert such as those from mortgage-wise.co.uk so you will know the options available to you and you can understand the different kinds of mortgages more easily. This way, you can make a better, more informed choice.