Whether with the bank or the broker - each consultation is individual. However, there is a rough procedure which we will explain to you here. In addition, you will find tips on questions that come up to you and on points that you should definitely address to your advisor.
How does a consultation for real estate financing work?
As different as the individual advisors at the banks and financial intermediaries are, so different can the consultation for your construction financing look. "There is no standardized procedure, but it always depends on the individual situation of the customer , says, chairman of the Federal association of the real estate financiers. "Therefore a good advisor works first like a physician with the anamnesis: It examines the customer and knocks its conceptions and conditions off.
The course of your consultation also depends on the extent to which you have prepared yourself (you will find tips on this in our article "Preparing for the financing discussion") and how deeply you want to get into the matter. If you are interested, your advisor will present the basics of the various mortgage models to you. If you are more interested in figures, you can go directly into the calculation of your concrete offer.
The 5 phases of the consultation: from getting to know each other to making a decision
Despite the differences, each consultation can be divided into 5 phases, on the basis of which we would like to introduce you to what you can expect from advice on house construction or real estate financing.
Phase 1 of the consultation: Welcome, wishes and ideas
In the first step you get to know your consultant - and he you. Tell him about your wishes and ideas, about your personal life situation and about the property you have in mind. Do not be afraid to go into these points in detail. The more details your advisor knows, the more accurate the picture he can get of you.
"In order to be able to advise the customer well, I try to find out the true reason why he or she wants to buy a house," explains Anne Ahler, a construction finance specialist at Dr. Klein.
We,also appreciate Smalltalk: "This way I get important information that may seem irrelevant at first glance. I have to be able to assess in which phase of life the customer is and know his wishes and dreams. Sometimes this also results in information for an individual promotion."
Phase 2 of the consultation: Analysis of the financial situation
In phase 2 your concrete financial possibilities come into view. The consultant will ask you about your income and expenses, current loans, capital, and any major cash receipts such as gifts or bonus payments that may be due. At the latest now it becomes clear whether you went with the suitable conceptions to the height of the credit sum and the appropriate monthly rates into the discussion.
Both in the bank discussion and in the consulting discussion with a mediator you must fill out the self-disclosure. It is quite normal for you to feel rather glassy at this point - in fact you have to disclose your complete financial status. If you have the conversation at your house bank, you have the advantage that many data and account balances are already available.
Whether bank or broker, many advisors today offer screen-based advice. You sit together in front of the screen so that you can first track which data is required and relevant. Then it becomes exciting when you see which lenders would make you an offer at which conditions.
Phase 3 of the consultation: Calculation of the offer
Before the consultant calculates a financing proposal for you and enters your data for it, he will discuss with you how to optimise the interest rate. For example, do you really need an unscheduled repayment option or are you satisfied with changing the repayment rate if necessary? Does your family already have a property that could be deposited as collateral? With such adjusting screws, the offers can be improved under certain circumstances.
Now it depends on whether you are in a bank meeting or are advised by an independent broker on your construction financing. The bank advisor will check whether and which offer his bank can make you.
He may, however, also enter your data and wishes on a credit platform like the broker, indicating which providers would make you an offer for financing your property. This usually works in the traffic light system: red: no offer, yellow: under certain circumstances, further details are required, green: financing possible. In the following, your consultant will deal with the green and possibly yellow marked offers or the in-house offer.
Did you already know? One of the most frequently used credit platforms is Europace, an electronic marketplace where banks and insurance companies offer products to financial intermediaries.
Phase 4 of the consultation: Explanation of the offer
The 4th phase could be called the actual heart of the counselling interview: Now you have concrete offers in front of you - either from the bank where you are sitting or from several banks via the intermediary. Now let us explain the individual points to you in detail and don't be afraid to ask questions. The actual financing costs and the amount of the remaining debt after expiry of the loan are in the foreground.
You can see all credit characteristics at a glance on the so-called "ESIS", the European Standardised Information Sheet. This enables banks to fulfil their pre-contractual duty to provide information on consumer loans. Because you receive an ESIS for each offer, the comparison between the lenders and their conditions is also greatly simplified. If you do not receive it, make sure you ask for it.
Phase 5 of the consultation: Decide on an offer
Before you go into the 5th phase, namely the decision phase, you should allow yourself some rest.We advise our customers after the consultation: "Sleep! There is a lot of information that should sink in first. Only after sufficient time for reflection do we talk about the next steps." So it's better to arrange a follow-up appointment.
Until then, it is possible that you still remembered points or that interest rates have changed. Your advisor will take this into account and adjust the offer accordingly. Otherwise, the signature will follow at this point.
These are the questions you can expect during your consultation
Your advisor will give you many valuable tips on house construction and real estate financing during your consultation and, if you are interested, will also give you background information on interest rate developments, types of financing and forward loans. But you need to be clear about a few basic points.
It is best to think about the following questions in advance:
Which fixed interest rate is the right one?
Do you like to plan for the long term and want to secure the low interest level for as long as possible, even if you pay a small premium for it? Or is a very low interest rate more important to you and you are optimistic that you will also get follow-up financing at favourable conditions?
How high should the monthly rate for the financing be?
This question is about whether you can pay the loan - sustainably. Therefore, you should also take into account that your circumstances may change. What rate is affordable for you if, for example, a salary is lost for a certain period of time?
Do you have any other current loans?
If you have other credit obligations, these may be integrated into the new loan by rescheduling the debt. Talk to your advisor about whether there will be any other medium-term expenses that you want to finance, such as a new car or a refurbishment loan for your property.
Are there any assets that you do not want to contribute to the financing?
The more equity you bring in, the cheaper the costs for construction financing will be. Tied capital such as a life insurance policy can also be used as security. But think about possible projects in the next few years for which you need freely available capital. For example, are you planning a stay abroad for your children? Then you should not include this money in the financing.
Checklist: You should go through these points during the consultation on construction financing
The following are points on which you should definitely inform yourself during the counselling interview. Your advisor will probably talk about them on his or her own initiative. If not, you should definitely check it out. Use the following checklist, for example:
Residual debt: How much is the loan that remains at the end of the fixed-interest period? After how many years would you be debt-free? It would be best if your advisor drew up a repayment plan for you, which will inform you about the development of the loan.
Follow-up financing: Calculate with your advisor how high your rate would be if the building interest rates change up to the time of your follow-up financing. Talk to your advisor about building society savings; it may be worthwhile to secure the low interest rates in this way.
Fixed interest rates: Compare the conditions for building loans with a term of 15, 20 or even 30 years. How do they affect your rate and residual debt?
Flexibility: Can you suspend payments? Are unscheduled repayments possible? Can you change the repayment rate?
Subsidies: Be sure to ask whether funding is suitable for you. Sometimes there are also regional promotional programmes by the municipalities or federal states.
Why is my credit application rejected?
It may happen that you find out already during the consultation that you will not receive an offer for your desired financing. This is because lenders have to ensure that you can repay the loan.
Reasons for refusal may be:
- You have already often exceeded your dispo
- You have no equity and no collateral available
- You have a fixed-term employment contract or have been self-employed for less than 3 years.
- On your account statements, you will find postings from debt collection companies.
- They exceed the specified maximum age
- You have concealed installment loans or leasing installments
But don't give up hope immediately if your request is rejected in the bank meeting. You may have more luck with another bank. It looks worse if even an intermediary cannot offer you a building loan - because he usually has access to the offers of several hundred credit institutions.
What can you do then? Alternative providers who are not necessarily listed on a credit platform also grant loans. However, special care must be taken here to ensure that these providers are also reputable. Another possibility could be peer-to-peer loans, where you borrow money from private individuals.