Bank Loan and Special Repayment - Financing Check Single-Family House

Hello everyone,

we are currently planning our single-family house and I would be very happy to receive some feedback on our financing option:

House/Land:
- Land available (self-financed, purchase price ~120,000 EUR)
- House: planning/execution with architect, KFW-70 standard, 185 m² living space, with basement + garage, costs: (incl. incidental construction costs, architect, garden landscaping, furniture): ~600,000 EUR

Financials:
- Equity: 435,000 EUR, no liabilities
- planned loan: 165,000 EUR
- monthly income: 2200,- net (me) + 3500,- net (partner)

Financing offer:
1. Loan: Kfw (energy-efficient building, 153)
* 50,000 EUR
* effective annual interest rate: 1.26%
* fixed interest for 10 years
* installment: 489.75 EUR/month

2. Loan: bank loan:
* 115,000 EUR
* effective annual interest rate: 1.87%
* fixed interest for 10 years
* installment: 500 EUR/month
* special repayments: 5% / year

We expect that within the next 5 years we will have an additional 30,000 EUR available for repayment. The Kfw loan can be repaid early at any time without costs, the bank loan only with 5%. We also assume that after the 10 years we will only need a small follow-up financing, hence the shorter terms.
We have chosen a total monthly installment of 1000 EUR. We can currently easily afford this, but since two children are planned, this amount is deliberately kept lower so that I can manage this installment alone later. If there is money left over (as long as my partner is working full time or works again after one child), we can make special repayments. We still want to try to get 10% special repayments per year. We want to extend the KfW loan to 20 years, since this results in a lower annuity for this loan and the rest can go into the (more expensive) bank loan so that it can be repaid faster – the extra interest charge for the extension to 20 years is less important to us here.

What do you experts think of this model? Do you have better ideas? Is the offer fair? We got the offer from a local bank – can we get better conditions online?

Thanks in advance for constructive criticism! :)

Regards
baumhaus

May I marry you :) If you think to have about 30k left after 5 years, I would borrow about 50k over 5 years, the rest over 10 years. With your numbers, you should also ask an agent.

We want to extend the KfW to 20 years because this way we have a lower annuity for this loan and can put the rest into the (more expensive) bank loan so that it can be paid off faster – the interest surcharge for the extension to 20 years is less significant for us here.

Then calculate for yourselves whether that is really cheaper ... I just did a quick calculation and say: No. Honestly: I would just agree to it and that’s that. Even if you now got a better offer – it’s only a matter of a few euros in savings. For that, you have a bank locally. The special repayment of €30,000 could also be spread over a few years (which you would have to do anyway with 10%) and here too, it’s only a matter of a few euros saved.

May I marry you :) If you think you will have about 30k left after 5 years, I would take about 50k over 5 years, the rest over 10 years. You should also ask a broker based on your numbers.

We have also considered taking 50K over 5 years, but since we could make special repayments on the KfW loan at any time anyway, we had planned the money for that.

Then calculate for yourselves whether it’s really cheaper ... I just quickly calculated it and say: No.

Honestly: I would just close it like that and be done with it. Even if you got a better offer now – it’s only a few euros difference in price. In return, you have a bank nearby. The special repayment of €30,000 could also be split over a few years (you would have to do that with 10% anyway) and here too, it’s only a few euros saved.

We only did a rough calculation over the weekend and it worked out for us – but I will check again. You are right about the "local bank" – and that is an important argument for me! At least in case of problems, I have a direct contact and not a different advisor every time on the phone, who don’t communicate with each other. Of course, we could/should split the special repayment on the bank loan as well, but it would be nicer to be able to pay off more faster. We will continue to compare.

Thanks to both of you for your suggestions!

Hello f-pNo, thank you for your comments as well.

Under the premise that the OP wants to achieve a lower rate, (...)

Basically yes, but I think you have not yet understood my motivation. For us, the 1000 EUR/month rate is fixed. Since we need two loans (KfW and bank loan), the question is how we divide the 1000 EUR. In the 500/500 case, which I presented in the first post, we see the problem that with our planned special repayment of 30K after about 5 years, we can get rid of the KfW loan, which can be repaid at any time, quite quickly, but then can only continue to pay off 500 EUR monthly from the bank loan, although we could do more (excluding the 5% special repayment), and thus pay much more interest in the long term.
With the KfW model over 20 years, as you correctly calculated, we have a monthly rate of 255 EUR, i.e., 750 EUR remain for the bank loan, so we could also pay off better after the KfW loan is gone. Therefore, the slightly higher interest from the KfW in the 20-year model already pays off for us since we want to repay earlier anyway.

Positive side effect: the interest for the bank loan also falls slightly due to the higher repayment, more precisely to 1.71%, we have already received a new offer for this.

Best regards,
baumhaus

With many loans, you can vary the repayment a few times during the term.