Housing company loans for new housing
The loan of the housing company makes the sale price of a new apartment appear lower and the shareholder's personal mortgage lower. It's worth noticing, that the monthly payment may increase after the end of the installment exemption for the housing company's loan.
New-build apartments can be financed by a housing company loan, in which case the housing company assumes responsibility for a loan that is divided between the owners according to their shareholding and the size of their apartment.
Shareholders pay their share of the housing company loan as a monthly repayment installment. It includes interest and capital repayment. Buyers are often offered an installment exemption, during which only interest is paid and the loan capital remains waiting. When the repayment starts, the monthly installment rises.
If one of the shareholders is unable to pay their share of the housing company loan, the other shareholders may be liable to cover it under joint liability, if housing company’s other security measures, such as taking over, renting and ultimately selling the apartment, are not successful.
When the method of financing is company loan, the sale price seems low because most of the debt-free price is financed by the company loan. The high share of debt per apartment makes the purchase price of the apartment look low.
- For example, if the debt-free price of an apartment is EUR 250,000, a debt share of 70% is EUR 175,000.
- The buyer pays a purchase price of EUR 75,000 to the seller and is left with a debt of EUR 175,000 for the housing company loan.
- The housing company loan may initially only require interest payment (a so-called installment exemption), but later on the capital repayment can be remarkably higher.