Building society savings as a mixture of investment and loan.
Building savings – an investment
When it comes to building savings, the building savers (also known as investors) conclude a building society contract with a building society.
So building savings is a special form of investment, which ultimately leads to a low-interest loan if the home saver so wishes.
The legal regulations are laid down in Law on building societies.
Run through the term of the building society contract and which take several years. These sections are referred to as:
- Savings phase
- Allocation maturity
- Loan phase
First of all, a sum is agreed with the building society that is to be achieved with building society savings. This is the so-called home savings sum. In the savings phase, around 40 or 50 percent of the home savings sum is saved. This usually takes 5 to 8 years.
During this time, the building society grants annual credit interest of between 0.5 and 1 percent. In addition, there is usually funding from the state and the employer. These grants are referred to as capital gains.
If the home saver has saved around 40 or 50 percent of the originally agreed home savings amount through savings and credit interest, the home savings contract is ready for allocation, ie the home saver fulfills all the conditions to apply for a home loan.
To achieve this second phase of building savings, the following conditions must be met:
- Minimum savings amount must be available
- The minimum term has been reached (describes the time between the conclusion of the contract and the earliest possible allocation)
- Minimum saving time has been reached (indicates the period over which savings were made at least)
- Target rating number was reached (determined by the building society for reasons of fairness)
If these requirements are met, the building society will pay the saved amount to the building society savers and grant the building society loan. So you are in the loan phase. As a result, the home saver has the full 100 percent of the home savings amount agreed with the building society available in the form of funds.
This money then flows into real estate financing and, like a normal loan, will be repaid in monthly installments in the coming years by the borrower.
Financing your own home with building savings should definitely make a comparison between different providers. Not all building societies have the same conditions.
Some offer bonuses, others lure with reduced fees for the conclusion of a contract. When comparing, you should also consider the following factors:
- Amount of the loan interest rate
- Amount of the interest on the credit
- Minimum contract term until allocation
- Minimum saving time
- When comparing interest rates, one should keep in mind that even small deviations after the decimal point can sometimes lead to big differences.
Use calculator. In this you simply enter the amount of the home savings amount, the number of years until the allocation and the savings rate and you get a list with offers from building societies.
For other computers, you enter the monthly saving amount and the saving duration.
want to build. So a long saving time is not a disadvantage for them. They can also use the building society contract to receive government grants such as residential Riester.
If you want to use home savings as a pure saving of money and don’t want to take out a loan, home savings will only be worthwhile if you can hope for government funding. If this is not the case, you get more credit interest for an investment in the form of time deposits or overnight money.