In the past, the Sparkasse or Volksbank and Raiffeisenbank was automatically the local bank for the majority of citizens qua birth, the relationship between bank and customer has changed significantly, especially due to the trend towards free current account that began more than 20 years ago.
the direct banks have Benefited. Regardless of the fact that banks have increasingly rediscovered the pricing of the current account, customers ‘ desire to meet their bank advisor face-to-face has declined sharply. This trend is intensifying and younger customers in particular prefer the uncomplicated way of doing the credit business from the comfort of their home sofa.
Carsten Zimmermann is Chairman of the Board of the Bundesverband Baufinanzierung e.V.
Borrowers should not only pay attention to the interest rate
Construction financing is a question of trust and is derived from the Latin credere (trust). The banker lends money. He believes and hopes to get it back later. But trust is not a one-way street. The customer should also be demanding.
Trust, faith, hope, aspiration. Sounds like psychological babble and not the best price offer. In times of “stinginess is cool” a focus on the interest rate is important, but by no means the sole criterion. Why not just pull the price? Because despite all market transparency, often only a very static financing concept is comparable in model form. And the supposedly best offer in the overall cost balance is not necessarily the credit model that best fits your family or career planning.
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Home bank, direct bank or broker – Who is better?
It is never wrong to take the price – in this case the interest – as a first indicator. No construction financing consultant, however good, will come to the conclusion with critical and reasonably informed customers, if he calls bad conditions. In this respect, the Association of mortgage lending is not always to acquire, in principle, an Overview of alternative offers. But how do you actually find your way around the market and how can I make sure that something decisive does not go through my fingers?
Do not accept the first best offer
First of all, it is positive that the market is much more transparent than before. For example, if you have an initial offer after a conversation with your bank, it is not one on which you should place your signature. It initially serves as orientation until further discussions have been held and further offers are on the table.
In our opinion, the consultation is mandatory, unless you are a professional or very knowledgeable repeat offender. You should always ask for an additional offer, more than three only if the quality of the advice has not satisfied you. An independent intermediary must not be absent from the offer mix. Whereby independently always refers to the fact that this intermediary can fall back on as large a banking market as possible.
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At the mediator itself, the spirits are divided. Why? First, he receives a commission for his performance leading to a credit conclusion. That still doesn’t feel right in Germany, always a bit opaque and dubious.
Second, there are many of them and to distinguish a good from a bad is not easy for a layman. Thirdly, the intermediary is finally a competitor for classic branch banks, especially savings banks and cooperative banks, which do not themselves cooperate with mediated business.
If, however, according to the statistics portal Statista, 34 percent of private construction financing was already completed through intermediary portals in 2018, this does not exactly speak against this sales channel. But this is by no means a testimony to the quality of an intermediary. Nevertheless, intermediaries have the theoretical ability to string credit packages from several hundred providers (especially if they work with platforms). A major advantage of intermediaries is that local banks such as savings banks and cooperative banks also offer their products via these platforms. The big banks will also play there in concert. For example, the bank’s on-site offer, which was personally received, can be compared very well with the condition of the same institution on one of the platforms.
Do the commissions make the loan more expensive?
In the case of a serious intermediary, we would not assume that. As in any industry, however, there are black sheep and especially the brokerage business offers sufficient scope for design. As a rough rule of thumb it can be said that with a reasonable commission of one percent of the loan amount for the intermediary, the same bank calls comparable interest rates on the spot for the customers it advises itself. If, on the other hand, it does not take the customer welfare quite so exactly, can also once 2.5 percent commission enforce. This is enough for a commission of 10,000 euros at a conclusion of 400,000 euros. What this means in practice and for the interest rate is to be clarified once again below:
Financing example:
- Loan amount 400,000 euros
- tied borrowing rate for ten years 1.0 %
- 2.0% initial repayment
- 1.0% Commission of the loan amount
In the above example, the customer pays about 36,000 euros in loan interest during the ten-year period Interest retention period. If the intermediary increases the commission to 2.5 percent, this directly affects the interest rate. With a loan amount of 400,000 euros, the commission increases by 6,000 euros. If the bank now has to spend 6000 euros more in commission, it will recover this via the interest rate. The borrowing rate rises to around 1.17 percent.
In the above example, if the fixed interest rate rises from ten to twenty years and the borrowing rate rises to 1.6 percent, the increase in the commission “only” affects the interest rate by 0.1 percent. If the intermediary also operates in his own pocket, the interest rate rises from 1.6 percent to 1.7 percent. Given the already existing differences of 0.3 to 0.5 percent from bank to bank, such differences easily disappear as fluctuations in market participants. The longer the interest rate fixation, the less visible the greed.
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The Bundesverband Baufinanzierung advises: Baufinanzierungen ohne Vermittler funktionieren. However, a balanced result can only be achieved if as many banking offers as possible are optionally possible. The construction financing platforms proceed similarly and often have the same institutions and thus prices on offer. Therefore, an offer from the bank – if available – and an offer from an intermediary are usually sufficient.
The advantage of an intermediary offer is the comparability, because only there on the platform the same parameters to the object and to the income relations are set. When everyone has access to the same pool, the quality of advice is crucial.
- Are you asked about your goals, wishes, possibilities and premises?
- Are public funds actively addressed?
- Do you talk about alternative durations after a structured analysis?
- How substantial and competent and what added value does your counterpart offer you?
- Does he or she initially give you the price of the work (commission)?
- And last but not least: Does he or she fancy you in a positive sense?
A free and fair interest comparison, further hints and tips get members quickly and reliably at the Bundesverband Baufinanzierung e.V.
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