THE CONTRACT – OLD HAT OR MODERN CLASSIC?
April 12, 2019
The Bauspar contract is anything but old hat, but an attractive way to finance home ownership. The advantages and the flexibility offered by a Bauspar contract characterize this investment, which is also interesting for pure profitability.
Historical overview: The history of the Bauspar contract.
The history of collective building savings has already been documented in pre-Christian times in China. Building societies in their present form are in operation in England, Brazil, the USA, South Africa as well as Australia and New Zealand in the period from the late 18th to the 19th century.
At the end of the 19th century, the idea and the concept of building saving were introduced by Pastor von Bodelschwingh. The times of reconstruction in Germany, after the introduction of the German Mark in 1948 and the economic miracle brought, also due to the enormous need for housing, the Bausparkassen in the young Federal Republic of Germany to bloom.
The concept: simple, obvious and still functioning today.
In the austerity phase of the Bauspar contract the minimum savings credit is accumulated, whereby the agreed Bauspar sum with between 3 and 10 per thousand is spared. The difference between the accumulated sum and the contract amount is then compensated by a home savings loan. Interesting and noteworthy is that the homeowner has a legal claim to the loan. This legal claim is even inheritable. The home savings loan is granted at a particularly favorable interest rate. All home savings loans are repaid as annuity loans, that is, a fixed rate over the entire term determines the amount of the rate. Loans from building and loan associations can be redeemed at any time without observing a notice period and also without paying prepayment penalties, as is customary at banks.
Use of home savings loans
Building society loans can only be used for residential purposes in accordance with § 3 of the Bausparkassengesetz. The term is generous. While previously only owners could claim home savings loans, tenants are now also among the group of people who can get such loans, for example to make a new bathroom. A wealth of tariffs has arisen around the Bauspar contract. The various building societies have agreed the tariff arrangement on the today’s need, so that fast saving tariffs and Bausparen over capital-effective achievements are possible. A number of government allowances make home savings more interesting. Thus, under consideration of special income limits, housing subsidies and employee savings allowances are granted. Within the framework of the Riester pension, Riester building savings contracts are also to be arranged. Building savings is a flexible and interesting pillar of mortgage lending, which is recommended for each client by flexibility and consistent and therefore calculable contributions, both in the savings phase as well as after the allocation, ie in the eradication. This traditional form of saving has lost none of its original appeal. Because of the many offers in this area a comparison of the building societies is advisable.