Building Savings-Based Bank Loan

Hello everyone,

actually, the financing for our planned project is already quite solid, but when recalculating, a few thoughts come to mind.
Minus KFW loan and equity, we still need a bank loan of 130,000 EUR. This has already been offered to me several times by different providers as building society-based.

What interest rate is behind that? One would need to know that for a serious calculation. What loan-to-value ratio?

The loan would then be repaid with a minimum of 1% and meanwhile a building savings contract would be built up, which after allocation in 15 years would pay off the remaining debt with a guaranteed 2.8%.

What repayment is assigned to the building savings contract?

Actually quite a round thing. In this variant, after 15 years there would still be a residual debt of about 100,000 EUR, which would then be refinanced at 2.8% without risk. If I now add exactly the same amount as the building savings contract additionally to the repayment, I still come to a residual debt of about 60,000 EUR. Now the residual debt is not secured, but calculated with the same burden, the follow-up financing would have to cost more than 11% for it to come out the same.
Do I now have a thinking error here or is the second variant the better alternative even without follow-up financing and is the risk manageable?

There are still some questions open to answer that concretely.
You have already mentioned the interest rate risk, currently we are still more than 3% away from the average interest rate.
How high is the Kfw loan? How long is it fixed? What initial repayment, or total term?

You have been offered a secure financing, calculable until the end, which, according to a cautious projection, will be fully paid off in 26 years and offers you a lot of additional options. Until then, you know your monthly burden exactly.

Your idea of accumulating the necessary savings over 12 months and then using it as a special repayment is appealing, but it is basically a bet on the future interest rate. I would not make that a mandatory repayment at all.
With your remaining debt of €60,000, an increase to the average interest rate of 7.8% means an increase in the monthly burden of around €155.

JoS
Advice – but fair!

Which Da.-interest rate is behind it? You would need to know that for a serious calculation? What is the loan-to-value ratio? What repayment is assigned to the building society saver?

There are still some questions open to answer that concretely. You already mentioned the interest rate risk, currently we are still more than 3% away from the average interest rate. How high is the Kfw loan? How long is it fixed? What initial repayment, or total term?

The bank loan has 4.29% loan-to-value ratio, but that means nothing to me. The KFW loan of 75,000 is fixed for 10 years and designed so that only a small residual debt remains, which should be repayable under normal circumstances afterwards within the scope of moderate savings.

You have been offered a secure, calculable financing until the end , which, according to a cautious projection, will be fully paid off in 26 years and offers you many additional options. Until then, you know your monthly burden exactly.

Your idea of accumulating the necessary savings over 12 months and then using it as a special repayment has charm, but it is basically a bet on the future interest rate. I would definitely not make that a mandatory repayment. For your remaining debt of €60,000, an increase to the average interest rate of 7.8% would mean a rise in the monthly burden of around €155.

JoS Advice - but fair!

I already said that it has a certain charm and does not sound bad. I am certainly aware that a rising interest rate means an increasing interest burden, however, an almost doubled amount to be refinanced naturally has a negative impact on the time until maturity, and a longer term then results in a generally higher total interest burden.

The bank loan has a 4.29% loan-to-value ratio but that doesn't tell me anything.

The ratio between the loan value (the value the property represents for a bank) and the amount of external capital used. For example, loan value 100,000, you need 60,000 then you have a loan-to-value ratio of 60% = top conditions.

The KFW loan

(sorry which program? 153 or 124?)

over 75,000 is fixed for 10 years and designed so that only a small residual debt remains that, under normal circumstances, should be repayable afterwards within the framework of moderate savings.

75,000 € in a KfW loan almost fully repaid after 10 years? Respect. But I think you misunderstood something there. Sorry. Either KfW 153 maximum amount 50,000 (prepayment possible) or KfW 124, 75,000 ok, minimum 1 year interest-free, interest fixed for 10 years, total term 20 years (35?), then after 10 years there is still a residual debt of 46,498 € remaining. Prepayments are not possible there.
Kind regards
JoS
Advice – but fair!

The ratio between the loan-to-value (the value the property represents for a bank) and the utilized external capital. Example: loan-to-value 100,000 you need 60,000 then you have a loan-to-value ratio of 60% = top conditions.
(sorry which program? 153 or 124? ) !

The bank loan is designed to fully utilize the top conditions.
I just don’t know if 4.29% is really good, but given the offers I have seen so far, that fits quite well.

75,000 € in a KfW loan almost fully repaid after 10 years? Respect. But I think you misunderstood something. Sorry.
Either KfW153 maximum amount 50,000 (prepayment possible) or KfW 124, 75,000 ok, minimum 1 year interest-only, interest fixed for 10 years, total term 20 years (35?), then after 10 years there is still an outstanding debt of 46,498 €. Prepayment is not possible there.
Kind regards
JoS
Advice - but fair!

It is a KFW 124 loan, we initially planned Kfw 70 but since we don’t want underfloor heating, a heat pump is almost excluded as an option, and without it, in no one’s opinion is the effort to obtain Kfw 70 greater than the benefit.
The KFW loan runs with a repayment rate of just under 6%, so after 10 years a little more than 20,000 EUR will remain. I think we can save that up in 10 years or if a balance remains it can be refinanced. But that shouldn’t be a problem because then the first part of the monthly burden will drop away.