3 people can get a home loan
Real estate financing: what to do if you can no longer pay installments
Life and annuity options
Some insurers are currently offering their customers the payment of part of the ongoing profit sharing to bridge liquidity bottlenecks. This can of course eliminate liquidity bottlenecks, but has the disadvantage that these assets are missing in the retirement provision. In addition, caution is advised, especially with old contracts with good interest rates, around 4 percent (on the savings portion). If you take out the saved surpluses prematurely, the insurer is no longer obliged to pay interest on them at the agreed guaranteed interest rate. This makes things easier for the insurer because he has to pay less capital with the high guaranteed interest until the contract expires.
In the event of bottlenecks and difficulties in paying the current contributions from current contracts, there are a number of options:
- You can set the insurance premiums in coordination with the insurer hours. This means that you continue to have insurance cover and later pay the premiums that you cannot pay now. This can also be possible for a longer period of time - depending on the arrangement and agreement with the insurer.
- You can temporarily cancel the contract put dormant, so conclude a suspension agreement with the insurer.
Attention: This leads to the interruption of the insurance cover for the period of the suspension agreement. A reduced retirement contribution may also be paid here.
However, after the rest period has expired, the insurance cover will be continued under the old conditions. That is still better than terminating the contract entirely, especially in the case of disability insurance, for example, which you may then no longer be able to take out again, for example due to previous illnesses or due to age.
- Exemption from contributions for the remainder of the contract period and thus continuation as a premium-free insurance. The contract then continues without payment of contributions, but the payouts after the contract expires are then lower and any additional insurances are no longer applicable or have lower benefits. The right to convert to premium-free insurance is enshrined in law. However, the premium exemption does not take place until the end of the current insurance period, i.e. usually at the end of the year.
Warning: This decision has far-reaching consequences. There is no entitlement to cancel the exemption from contributions, unless otherwise contractually agreed. If a return is possible, this can have tax disadvantages.
- Exemption from contributions for a certain period of timeif possible in consultation with the insurer. After the deadline has expired, the payment of contributions must be resumed. If the contribution remains the same, the benefit has been reduced accordingly. If the benefit is to be retained, it must be agreed with the insurance company that a correspondingly higher contribution rate will also be paid after the exemption from contributions has expired.
- termination: You receive the surrender value and no longer have to pay any contributions. Whether this is a sensible way should always be carefully examined. This is problematic, for example, if the contract is linked to occupational disability insurance. It simply cannot be replaced. It may also be a contract with advantageous tax regulations and low costs, in which case the termination should be carefully considered because of an only temporary bottleneck.
- Partial termination: You will receive part of the surrender value. This may be combined with a limited exemption from contributions. Then increased contributions would have to be paid after the deadline in order to receive full benefits again when the deadline expires. It can also be agreed that the contribution payment will continue, but then be lower due to the reduced expiry benefit.
- Offsetting of the contribution payment with existing excess credit. As long as there is still excess credit, you do not have to pay any more contributions.
- Interest loan: The insurer gives you a loan. Check what the borrowing rate is and compare it with offers from your bank. The advantage of this loan is the flexible repayment option. Furthermore, in an "emergency", the loan amount can also be repaid with the credit in the contract, with the consequence of a reduction in performance.
Be careful with the overdraft facility and with bridging loans
The use of the overdraft facility (also called "overdraft facility") on the current account is at most a temporary option. Always keep in mind that the interest rates are very high and the account must be balanced again.
Some financial advisors and credit institutions are currently advertising low-cost loans to bridge your economic situation. Keep in mind: You then have to repay these loans with monthly installments over several years. That puts an additional strain on your budget.
Option 3: Assess the medium-term situation and plan again
You should take a leisurely look at the existing real estate financing and plan thoroughly.
Find a joint solution with the lender for the continuation of the loan relationship with a view to your new financial situation. Be careful with such agreements and do not sign too quickly. Check exactly what effects the solution proposed by the bank has seen on the entire contract period. If in doubt, seek independent advice, for example from the consumer advice center.
We describe some possibilities and their advantages and disadvantages here:
Reduce the repayment
Anyone who has contractually agreed high repayments can agree with the lender to reduce the repayment - for example from 4% to 1%. This extends the repayment of the loan. But for the time being you get some air.
example: For an original loan of 250,000 euros with 1.5% borrowing interest and 4% initial repayment, the monthly rate is approx. 1145 euros. If the reduction of the repayment to 1% of the original loan is agreed, the monthly installment is only approx. 520 euros.
Those who have already made repayments for several years may have more leeway. Then the repayment has risen from, for example, initially 2 percent to 4 percent of the original loan debt. In relation to the current remaining debt, it is even higher. If you reduce the repayment to 1 percent of the current remaining debt, you can significantly reduce the burden. The loan repayment is then extended, however.
example: For a loan of 250,000 euros concluded in 2012, with 3% borrowing interest and 2% initial repayment, the monthly rate is approx. 1040 euros. The current remaining debt is around EUR 211,000 today. If you agree to reduce this remaining debt at 1% with the same interest rate, the monthly charge is reduced to approx. 700 euros.
For example, if you have agreed a variable repayment, you can make use of your contractual right to reduce the repayment rate. If your economic situation improves, you can increase the repayment later. Since these options are usually limited during the fixed interest period, this has to be weighed up. The loan repayment may be extended.
Suspend the repayment
If you can no longer afford the repayment, you can suspend it in agreement with the lender. Interest is still to be paid on the remaining debt. This does not decrease until the repayment is resumed.
Have special repayments paid back
As a rule, you can no longer have special repayments made in the past repaid. However, some treaties expressly provide for such a right. Then you can, for example, have a special payment from 2016 in the amount of 10,000 euros transferred back to your account. This increases the remaining debt and extends the remaining loan term.
If you do not find such a right in your files, you can only negotiate about it with the bank.
Option 4: Housing benefit is also an option for your own property
Housing benefit may also be an option for owners of residential property that they use themselves.
Because not only tenants, but also owners of a property are entitled to housing benefit, the so-called burden subsidy. The prerequisite is the use for your own residential purposes. Furthermore, the grant is only possible if the housing costs exceed your economic capacity. This means that certain income limits must not be exceeded.
The following costs can be considered as encumbrances on owner-occupied residential property that are eligible for load subsidy:
- Expenditures for interest and repayment on loans
- Maintenance and repair costs
- Property tax and other property taxes
- Insurance contributions for the property
- Certain heating costs
- administrative expenses
The amount of the burden subsidy depends in particular on the following factors:
- Number of family members living in the household
- Total household income
- Amount of the eligible costs for owner-occupied residential property
Applications must be submitted to the respective municipality. You can find independent information at the responsible federal ministry, among others.
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