The banks’ high equity requirements make it difficult for many households to access real estate loans. A recent study by the German Economic Institute (IW) shows that subordinated loans could be an effective solution to alleviate this problem. The LOANCOS Group, an experienced specialist in the processing of real estate loans, sees this as an opportunity to sustainably increase the home ownership rate in Germany.
Subordinated loans are financing instruments that can be placed behind primary construction financing and used as an additional source of capital. In particular, they offer households with a stable income but limited own funds an opportunity to replace all or part of the required equity ratio.
“Targeted subsidy programmes for subordinated loans could enable numerous households to purchase real estate,” emphasizes Dr. Clifford Tjiok, Chief Commercial Officer of the LOANCOS Group. “If public development banks were to make greater use of this instrument, it would be an effective lever for increasing the home ownership rate in Germany.”
Experienced partner for development banks
As a service provider with extensive experience in the processing and handling of development loans, the LOANCOS Group is very familiar with the specific requirements of such programs. The company has already worked for various development banks and has the necessary expertise to efficiently provide and process subordinated loans – also in combination with traditional construction financing.
Payment of real estate transfer tax in installments
In addition, models such as paying land transfer tax or other ancillary costs in installments are a way to reduce financial hurdles when buying a property. “Such flexible financing solutions can make a decisive difference in further facilitating access to home ownership. We can take over the servicing of the receivables on behalf of the lenders,” says Clifford Tjiok.
Image source: iStock/Monthira Yodtiwong
