The low interest rates that have prevailed for several years have already tempted many people to build a house or buy an existing property in order to fulfill their dream of having their own four walls. Others, however, hope for impressive increases in value for a profitable resale. But especially in the current interest rate environment, buying a home harbors some risks that potential home buyers should be aware of.
Tempted by low interest rates
In many locations, real estate prices have risen enormously in recent years, among other things, this development was influenced by the historically low interest rates. It is precisely these low interest rates that induce many people to pick up pens relatively quickly and sign a purchase or construction contract. The consumer center Hamburg (vzhh), for example, warns at this point: If you make the decision to buy a house prematurely and do not make realistic calculations, you also accept high risks.
These risks should be considered by home buyers
Especially with regard to the low interest rates, many potential homebuyers mistakenly assume that the loan is automatically cheaper. But real estate financing with low interest rates lasts longer in most cases, which is why the bottom line is that the total costs are not urgently lower than with financing with comparatively high interest rates, as the news channel “n-tv” explains in a report. In addition, it can happen that the new monthly installment after the fixed interest rate has expired is a significantly higher or even unsustainable burden due to interest rates adjusted upwards.
Another risk trap that the vzhh warns of is real estate financing that is based on insufficient equity. Because if this is too low, the missing portion weighs on the monthly costs. But with the rise in real estate prices, it is also difficult to afford the recommended minimum equity share of 10 percent.
One consequence of the increased real estate prices are increased ancillary costs when purchasing a property: These include real estate transfer tax, brokerage and notary fees. These costs must also be included in the loan together with the resulting interest, recommends the consumer advice center.
If you plan to use your own home as a place of residence in old age or if it represents retirement provision in the form of a tangible asset, factors such as suitability for old age, energy efficiency and mobility risk should be taken into account accordingly. If one of these points is not correct, there may be unplanned high renovation costs or a resale may be necessary, which harbors a considerable cost-risk trap.
Additional costs when reselling the property
In the event of an early sale – for whatever reason – there can be a considerable loss of assets. On the one hand, the desired sales prices cannot always be achieved under possible time pressure, on the other hand, if the real estate loan is terminated prematurely, early repayment penalties of several thousand euros must be paid. In the development of the property value, there are also many factors – such as the location – that should be considered before building or buying a property if a resale is to be profitable.
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