Choice of financing! How about Wohn-Riester / building savings contract?

Dear forum, I need your support for a suitable financing plan. I am planning to buy a semi-detached house - first occupancy by me - for 239,000. However, I cannot say how long I want to live in the semi-detached house, but at least 10 years. The repaid amount of the semi-detached house should then serve me as equity if I want to make a change again and buy a single-family house. Now I have the following financing options: Option 1: Loan term: 10 years / Loan amount: 239,000 / Bank: Oldenburgische Landesbank / Interest rate: 1.55% / Repayment: 2% / Rate: 707.04 / Remaining debt: 187,332.58 Option 2 (2 loans): Loan term: 35 years / Fixed interest period: 10 years / Loan amount: 50,000 / Bank: KFW / Interest rate: 1.6% / Repayment: 2.22% / Rate: 158.97 / Remaining debt: 39,285.40 Loan term: 35 years / Fixed interest period: 15 years / Loan amount: 189,000 / Bank: Oldenburgische Landesbank / Interest rate: 1.96% / Repayment: 2% / Rate: 623.70 / Remaining debt: 123,146.61 Option 3 (2 loans): Loan term: 35 years / Fixed interest period: 10 years / Loan amount: 50,000 / Bank: Kfw / Interest rate: 1.6% / Repayment: 2.22% / Rate: 158.97 / Remaining debt: 39,285.40 Loan term: 33 years / Fixed interest period: 30 years / Loan amount: 189,000 / Bank: Oldenburgische Landesbank / Interest rate: 2.27% / Repayment: 2% / Rate: 672.53 / Remaining debt: 26,710.13 What would you recommend to me and why? How does Wohn-Riester actually work? Advantages and disadvantages? I had imagined converting my existing Riester pension into a Wohn-Riester and then paying off part of the house again. What about the building savings contract? Are there advantages and disadvantages? How does financing via Wohn-Riester or building savings contract work? Many thanks for your help!!!!! Best regards

Hello Nils,

First of all, you want 100% financing? Don’t you have any equity? What have you been able to save or set aside so far? How does your income situation look? Basically, the targeted installments are already different (707€ vs. 830€).

I don’t agree with variant 1 and 2 at all. How do you imagine dealing with the remaining debts of 190K€ and 160K€ respectively??

The closest would be variant 3, although the remaining debts are still too high here. On the one hand, after 10 years, exactly when you also want to buy a single-family house, you are supposed to repay 40K€ of remaining debt all at once?! In addition, I would fully repay the second loan. For me, the financings are not well thought out. Have the banks offer you a financing plan that gives you security until your loans are fully repaid.

Think about your situation in 10 years. At that time (loan 1), you will have repaid 50K€ and want to use this capital for your single-family house? Then you have to be able to sell your semi-detached house again for the current purchase price... You will quickly decide to stay in the semi-detached house and the risk is definitely there that the interest will eat you up...

In my opinion, that depends on you; if you actually want to sell after about 10 years, then option 1, but with at least the total rate from option 3 or even higher. The 50K€ of "created" equity (without considering any possible increase in value) are just the incidental construction costs for the next build, so it ultimately amounts to 100% financing.

You are absolutely right, Musketeer... However, I personally would not agree to the "obligation" to really have to sell after 10 years, especially since the original poster wants to live in it for "at least 10 years"... If he ultimately lives there for 30 years, option 1 is the worst of all options...

Instead of one loan over 10 years, I would rather set a full repayment over 30 years. That would be a payment of about 920 euros. (At 2.27%) I would include in the contract that there is a special right of termination in case of sale of the property. If you then sell, you can repay the loan; if not, you are through until retirement and definitely SAFE!!

I would not bet that a semi-detached house with first occupancy will really increase in value in 10 years... In retrospect, that was the case during the real estate boom, but will it continue like that?

If he ultimately lives there for 30 years, option 1 is the worst of all options...

It is only the worst of all options under the condition that interest rates neither decrease, remain the same, nor increase significantly in the coming years. :D But I agree with you that for risk mitigation a longer fixed interest period is recommended. Whether it necessarily has to be 30 "purchased" years, especially if one is planning to sell before construction, I dare to doubt.

What puzzles me a bit is that in option 1 an interest rate below the KFW level is achieved with 1.55%, but in options 2 and 3 it goes back to KFW level with 1.6%.