Money Management

Constant loan: finance now, save in parallel

What is a constant loan?

A constant loan is a form of home loan financing. It is a combination loan that is made up of an advance loan and a building society loan contract. So it corresponds to home savings with pre-financing.

With a constant loan, you can secure the current interest rate over the entire term of the mortgage lending. This is particularly worthwhile in times when building rates are generally very low.

How does constant loan work?

If you have signed a contract for a constant loan with the bank or your building society, you will receive a repayment-free pre-financing loan and a building loan contract. The amount you need to finance your property will be paid directly to you. Another part goes into the home loan contract for the future home loan. The total amount of funding is derived from these two components. If the building society contract is ready for allocation after a few years, you can use the amount saved to repay part of the pre-financing. What is left of it continues as a home loan, for which you continue to pay your monthly installment.

Consistent rates over the entire term promise planning security

The interest rates for the pre-financing loan and the home loan are the same. Your building society contract serves as security for the bank or building society. In the first phase, i.e. until the home savings contract is allocated, the installment to be paid consists of the home savings rate and a fixed rate for the pre-financing loan interest. In the second phase, if the remaining amount of the pre-financing continues as a home loan, your rate will flow into its repayment and interest.

Accordingly, you always pay the same loan rate over the entire term of the contract and thus have planning security. As a rule, the term is rather long and is between 15 and 20 years, but can be agreed for up to 30 years.

After the home savings contract has been allocated, you can make special repayments

If the building loan contract is ready for allocation, you can use this amount to repay the first part of the constant loan. In many cases this takes around 8 years, after which you pay off the home loan with the other installments. Special repayments of any amount are now possible in this phase, which makes the constant loan particularly flexible.

Who is a constant loan suitable for?

A constant loan is suitable for everyone for whom interest rate security and fixed monthly installments are important over the entire term of the financing. Even if you don’t want to save equity for a long time to finance a property, the constant loan is an option. In addition, you will receive flexible, unlimited repayment options during the home loan loan phase.

This is an essential difference from a classic annuity loan. However, you should compare the conditions of the different providers exactly, because especially the special repayment right can be paid by some providers with extra fees.

Advantages and disadvantages of a constant loan

The constant loan appears very attractive because it enables you to buy a home quickly and flexibly. But you should always weigh up the advantages and disadvantages of a constant loan and keep an eye on the interest rate level.

These are the advantages of the constant loan

  • The rates remain the same over the entire contract period and you have planning security
  • From the allocation date, special repayments in unlimited amounts are possible and you can therefore redeem the loan earlier without prepayment penalty
  • Interest rate security over the entire contract period

These are the disadvantages of the constant loan

  • Very long terms of up to 30 years
  • Interest is paid on the entire loan amount over the entire contract period, which adds up over the years
  • The repayment only begins when the home savings contract is completed – this can not only be a psychological disadvantage, but can also become an expensive problem if you have to terminate the constant loan early
  • Commission payments and closing fees at the beginning of the building society contract can drive up the total costs

What are the alternatives to the constant loan?

As an alternative to a constant loan, you can also think about an annuity loan. Here too, the rate remains the same over the entire term of the contract. The advantage is, however, that the residual debt is continuously reduced and the repayment portion increases, you also do not pay any closing fees as is usual with building society contracts. With an annuity loan, you usually have to bring equity capital of around 15% of the financing sum, which is made up of the property price and the ancillary purchase costs. Under strict conditions, construction financing without equity may also be possible.

Calculate your constant loan with our building money comparison

Once you’ve decided on a constant loan, it’s about finding the best provider. The best way to get an overview of current conditions for building money is to use our building money comparison. Here you can filter for your location by zip code, enter the value of the desired property and the amount of the desired net loan. You can also see directly how the desired duration of the fixed interest rate and the amount of the repayment rate influence the result.

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