Are the conditions for purchasing a property good?

Hello everyone,

I have been a silent reader for a while. Now the unexpected opportunity has arisen to purchase an existing property near Darmstadt. Since we are relatively uncertain whether we have a sensible and good financing offer, I would like to ask for your opinion.

Key data:
He, 31, net €3,600, 13 salaries
She, 29, net €2,400, 13.5 salaries
Not married, planning children in about 2 years.

Purchase price: €600,000 + €50,000 modernization (full financing)
Additional purchase costs: €82,000 (through equity)

Due to the high amount and interest rate change risk, a split is planned:
€193,000 building savings contract 30 years (15 years fixed interest 0.72%, from the 16th year 1.25%)
€447,000 bank loan (15 years fixed interest 0.93%, 2.66% repayment)
Annuity is about €2,005.

Is a more sensible combination advisable? Are there possibly better offers?

Thank you very much for your valuable input.

Best regards
Lars

15 years at 100% financing for well under 1.00% is, in my opinion, a great offer. The guaranteed interest rate for the BS loan is also, in my opinion, acceptable. Which bank offered you this?

In your place, however, I would not feel comfortable with the annuity in connection with your Hamburg income. What will you do if a salary temporarily disappears due to children?

Is the 13th or 13.5th salary a guaranteed additional salary (guaranteed independently of performance via collective agreement or employment contract)?

I would go to the bank and ask about your limits. While you are asking here, the property will already have been bought by someone else. You should know your limits and, if necessary, act immediately if your gut feeling agrees.

Thank you very much for your feedback.

Deutsche Bank and BHW

Is the Bauspar contract interest rate acceptable? That means there is still potential for optimization.

Yes, 13 and 13.5 are contractually guaranteed. However, they are not included in our planning or only considered as a buffer in our planning.

I also had concerns about whether it is a solid plan. After setting up our household budget including future ongoing costs, we still have 2,000€ left after deducting all costs. If only 65% of the partner’s salary is available, we would have about 1,200€ left for a year. The plan is that she will initially work part-time, then full-time thereafter.

The bank sees no problem, although of course they also represent their own interests.

We have already reserved the house and have been negotiating with different financial institutions for several days.

Is the home savings contract interest rate okay? That means there is still potential for optimization.

Okay means that I am more familiar with classic loan conditions and from my point of view, I do not consider the BS loan interest rate particularly good or particularly bad. Keep in mind that you have to pay a closing fee of - at BHW - 1.6% on the savings amount. That is about 3,000 EUR.

In my opinion, securing the ZÄR always depends on the long-term income development. If you have already reached the end of your personal career ladder and no salary increases beyond the usual (tariff) increases are expected, I would tend to secure the ZÄR. If the opposite is the case, I would rather choose a different, riskier financing structure...

The following example calculation for clarification:

650,000 EUR, fixed for 15 years at 0.93% p.a. with a monthly rate of 2,005 EUR results in an initial repayment rate of 2.77% p.a. and an estimated total term of 31 years.

After 15 years, you still have a residual debt of around 360,000 EUR with interest paid amounting to 71,000 EUR.

The loan-to-value ratio then - assuming a lending value of the property of 520,000 EUR (650,000 EUR x 80%) - is 69%, which corresponds to a 15-year rate today of around 0.70% p.a.

Let’s further assume that in 15 years the interest rate level is 400 basis points above the current level, which leads to the following key data for the follow-up financing:

- Residual debt 360,000 EUR
- Fixed for 16 years
- Interest rate 4.70% p.a.
- Remaining term 16 years

= Annuity after the first fixed interest period: 2,673 EUR

Calculation without special repayments, by the way...

Ergo your annuity increases by 668 EUR. This could additionally be adjusted for inflation... In my opinion, a justifiable risk. But everyone must decide that for themselves.

Yes, 13 and 13.5 are contractually guaranteed. But they are not included in our planning / only included as a buffer in our planning

Oh, I see. So you currently don’t have 6,000 EUR/month per se, but 6,500 EUR/month available. That looks much better again.

We have already reserved the house and have been negotiating with different credit institutions for a few days.

Then calmly survey the offers...

Feel free to already present the seller/agent with a financing confirmation from DeuBa, so that no other interested party interferes... FC does not mean that you will ultimately finance with DeuBa.

That would be too tight for me. Especially since there are no children yet, but they are planned. One person's income is reduced for several years, not just for one. Better to calculate with 50% of the income; parental allowance is not a gift. Your wife really wants to work full-time after one year? Are you sure? You really have to want that, and childcare must be adequately ensured. It will become difficult at the latest with the second child (if planned). If I roughly calculate, about 50% of your salaries (including [Kindergeld]) would go towards the house. And that with significantly higher costs (because of the children).