Interim financing is necessary in the context of construction and real estate financing if you have to pay a larger amount and expect the relevant amount, but do not have it yet. In other words, there is equity capital, but you cannot use it yet. In this case, you take out an interim loan that bridges the time between the due date of payment and your own payment.
There are various situations in which interim financing around the house can be considered. Here are three examples:
You have found the right house and want to close the deal. To get the necessary home loan, you need a certain amount of equity. However, part of the equity is in a home loan savings contract that is not yet ready for allocation and will only be paid out in a few months. With an interim loan, you can bridge the missing portion until payment is made.
You want to sell your previous house because of a move and buy a new one at your new place of residence. Then you may have to pay for the new house, but have not yet received the full amount from the buyer of your old house. For this temporary bottleneck, take out interim financing.
You are in the middle of building a house and have to finance the next construction phase. In order to be able to pay the building costs incurred, you expected to have life insurance or another financial investment paid out. If this is delayed, you can take out interim financing to bridge the gap.
In most cases, interim financing in connection with construction financing is concluded. But there are also other areas where this can make sense. For example, investments in a company can be financed temporarily. This is also possible for private individuals. The repair of your car can be financed with an instant loan.
Interim financing has a number of peculiarities in comparison with a conventional building loan.
With interim financing, the interest is generally higher than with long-term construction financing. So you have to expect higher costs. This is due to the increased risk of default on an interim loan. Since the banks decide on the basis of an applicant’s individual requirements and the current market situation, no general interest rate for interim financing can be given. In contrast to a classic installment loan or car financing, interest rates are variable and change during the term of the interim loan.
Representative example according to §6 PangV: effective annual interest rate 0.21%, fixed debit interest rate 0.20%, net loan amount $ 150,000, fixed interest rate 5 years, repayment 2%, interest costs $ 1,497.32, accedo, status: today | Sample calculation
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Interim financing is also often equated with the term pre-financing. But this is not correct because there is a difference between the two forms. With an interim loan, the receipt of money is secure. The amount to be financed is secured, for example, by a signed sales contract for the old house.
In the case of pre-financing, however, the repayment of the loan is not yet certain. This can be the case if the minimum term of an existing building society contract has not yet been reached. Then the availability of equity at a certain point in time is not yet finally certain.
Already knew? A variable loan works in a similar way to interim financing. This form is one of the classic types of financing for real estate. Here, too, there is no fixed interest rate, there is an interest rate adjustment every 3 months. The advantage is that the variable loan can be repaid in full at any time without having to pay a prepayment penalty.
However, it is more expensive than an interim loan because you will have to pay notary fees and land register costs. In addition, the term of the variable loan is not limited and the monthly installments consist of both interest and a repayment component.
An interim loan cannot always be avoided. If you are thinking of taking out interim financing for your property, consider the pros and cons.
As with all other types of loans, the lender expects you to meet some conditions. To get an interim loan, you must meet the following requirements: