Real estate financing is often a little more difficult for the self-employed than for employees. But you can influence some factors and thus get a cheaper loan.
Financing your own home, regardless of whether you own a house or a condominium, can only rarely be financed from pure equity. Rather, it is necessary to use debt capital for this financing project. Since such real estate financing can go into the 100,000 dollars, a suitable loan must be taken out.
Such a real estate loan is often even easier to get from the bank than other forms of credit such as an installment loan. The reason is as follows: The real estate loan is a different form of loan than the installment loan – the latter can often also be given as a blank loan. In principle, however, the real estate loan is very well secured for the bank, namely through the land charge that has to be registered. The question of home finance also often arises with self-employed or freelancers – in this respect, they have the advantage of real estate loans on their side through the land charge.
Influencing interest rates on real estate finance …
Of course, it is important in the first step, even for the self-employed and freelancers, to get the loan and then on the second level that this loan should also have the best possible conditions. In general, one can differentiate between two variants of loans, namely the annuity loan and the final loan. It is not possible to say in general which of the loans is cheaper and which one should be taken now. Rather, it depends on very different factors that are involved. But sometimes you can control it a little and influence the factors – for example, the interest rate.
… through equity
You can influence whether the interest rate is high or low, namely through the equity that you bring to real estate financing. Equity has a significant impact, especially when it comes to real estate financing, how expensive or cheap the final financing will be. For freelancers and the self-employed, the banks are usually a bit fussy and want to see a slightly higher share of equity – according to the banks, this should be between 20-25 percent of the total cost of the financing. But as I said, not only does the bank benefit because it has more collateral, but also the borrower, because the higher the equity ratio, the cheaper the loan.
The credit rating in real estate financing
With a high level of equity capital, the self-employed and freelancers can also get cheap financing. But in addition to the equity capital that is brought into the financing, the creditworthiness is another factor that influences the financing. The creditworthiness is particularly important for people who are not employed, ie self-employed or self-employed. The reason is quickly explained: the income of the self-employed often fluctuates more than it does for people with a permanent employment contract. Salaries for the self-employed can vary from month to month. A good credit rating is very important for the bank and also leads to the fact that as a self-employed person the financing of a property is approved by the bank.
When it comes to financing a property, banks have a very wide scope like almost nowhere else when it comes to debt capital. When it comes to real estate financing, banks can vary a lot in terms of the conditions they grant and have a lot of room for maneuver here. Unfortunately, the borrower has no influence on what is probably the most influential factor in terms of conditions – this affects the general interest rate level. Whether the financing of a property is ultimately cheap or not depends to a large extent on the key interest rates.