Financing via bullet loans
It is not uncommon for bullet loans to be offered. With this form of financing, you conclude two contracts at the same time:
- a loan agreement and
- a savings contract.
Instead of paying off the loan, you save capital in the savings contract so that you can repay the loan in one fell swoop at the end of the term. With this model, you pay the same high interest rate over the entire term because the loan amount does not reduce due to a lack of repayment. The savings contract is also pledged to the bank as additional security, that is You cannot freely dispose of the funds you have saved.
Classic capital or unit-linked life insurance policies or investment savings plans are offered as savings contracts for this model. In order to keep the monthly burden as low as possible, providers calculate the term over 30 years, for example. However, there is a risk that actual developments will be different and the forecast will not work out.
Classic life insurance
Today they only offer a very low guaranteed interest rate of 0.25 percent. You usually receive at the end a so-called expiry performanceconsisting of the guaranteed sum insured plus the so-called surplus shares.
However, these surplus shares are not guaranteed. If the guaranteed insured sum is agreed to be lower than the loan amount, you bear the risk that the payout amount will ultimately not be enough to repay the loan in full. You should also note that since January 1, 2005, half of the income has to be taxed when the contract expires.
Unit-linked insurance policies
They usually have it no guaranteed expiration performanceso that with this product it only becomes clear at the end whether the bill has paid off. And even if you pay into an investment fund instead of paying it off, a stock market crash can ruin your plans to pay off the entire loan amount at once with the savings you have saved.
You should therefore under no circumstances assume that your so-called “repayment replacement product” will generate more returns than you pay interest to the bank. Rather, you run with these models There is a risk that you will have less capital available at the end of the term than planned and either pay off the difference to the loan amount from your own funds or, if you don't have them, you have to take out another loan.
Another risk lurks at the end of the first interest rate fixation period, for example if interest rates have risen. You must conclude a new interest rate agreement with your bank until the loan is finally repaid. The increased interest increases your monthly burden because you have not yet repaid a cent of the original loan amount. For this reason, selling the property early would also be expensive. Since the loan has not yet been repaid by one euro, an early repayment penalty would be due on the entire loan amount.
In the past, bullet loans have always been more expensive for builders and property buyers than annuity loans. You should therefore do this for owner-occupied properties Repay loans directly without going through a savings agreement and avoid the final financing option.
You are welcome to get independent advice on this, for example from a consumer advice center.
