Combination Loan BSS vs. Annuity Loan

Hello everyone,

I have already read so much about the advantages and disadvantages of the combination loan, but I am still unsure what the best solution is in our specific situation. Many of the reports and tests of combination loans also refer to times when interest rates were somewhat higher - so the pros and cons of the combination loan may have shifted somewhat by now?

Below are the details:

Loan amount: 380,000 EUR
Equity capital: 80,000 EUR
Desired monthly payment: approx. 1,500 - 1,600 EUR
Net income (2 people): approx. 5,500 EUR
(Planned) special repayment per year: 7,500 - 10,000 EUR (may vary somewhat)

The distribution would be as follows:
KFW loan: 100,000 EUR at 0.75% for 10 years (primarily repaid through special repayments)
Remaining loan amount: 280,000 EUR - this is now primarily the subject below

Offer 1: Combination loan with building savings contract
Bullet loan for the 280,000 EUR with an interest rate of 1.38% for 10 years
Building savings contract for the amount of 280,000 EUR:
Monthly deposit of approx. 1,400 EUR with an interest rate of (meager) 0.2%
Contract fee: 1.6% of the building savings amount
Guaranteed interest rate upon allocation (50% of the building savings amount): 1.1% (otherwise 2.35%)

Interest costs for the loan over 10 years: 322 EUR * 12 * 10 = 38,640 EUR
Costs for the building savings contract: 4,480 EUR
Total costs after 10 years thus amount to 43,120 EUR
Then interest rate security at 1.1% (since we assume we will achieve allocation at this interest rate)

Offer 2: Annuity loan - fixed for 15 years
Annuity loan for the 280,000 EUR with an interest rate of 1.70% fixed for 15 years
Maximum special repayment 5%

Interest costs for the loan over 15 years: 45,504 EUR
The advantage here would be that after repayment of the KfW loan after a maximum of 10 years, the special repayments could flow into this loan, thus reducing the interest burden from year 10 to 15.
After 15 years (or after 10 years if sensible) a follow-up financing of the remaining sum, interest accordingly not yet known.

Conclusion:
Well, this is exactly where I am still unsure. The advantage of Offer 1 is certainly the security and flexibility in the rate, the goal must only remain that at the end of 10 years 50% of the amount is in the fund to secure the favorable interest rate. Unfortunately, there is no annuity effect over 10 years here. That on the other hand is the big advantage of Offer 2, that the planned special repayments will have an appropriate effect here (especially from year 10 to 15).

I am undecided :-( I would simply be interested in your advice, what would you do in my place? Have you perhaps already had experience with the combination model? Does it make sense under these conditions and the current interest rate situation?

Your opinion? I am very grateful in any case!!!!

Best regards Sven

What would be the repayment rate in % for the annuity loan?

What is the combined repayment and interest rate for the Bausparvertrag loan after 10 years? 5 or 6 per mille?

And what flexibility is there with the Bausparvertrag? There is the contractual minimum savings rate. Also, you have to reach 50%. Anything else would be nonsense.

And what is the effective interest rate of the Bausparvertrag loan?

hello,

as caspar already said, the building savings contract is very rigid. 0.0 flexibility. unless you don't use it, which is rather unlikely.

if you repay KfW, you don't have to deal with special repayments, maybe you can also increase the repayment rate? some offer it for free

Hello Caspar2020 and HilfeHilfe,

I will try to answer as best as I can.
The repayment rate for the annuity loan would be around 4%.

Unfortunately, I do not know the effective interest rate for the [Bausparvertrag loan] (which is often seen as a disadvantage) - that's why it is also so difficult to compare. I tried to approximate it based on the interest costs and the additional costs for the [Bausparvertrag].

Thank you both for your answers!

Best regards
Sven

Hello Caspar2020 and HilfeHilfe,

I’ll try to answer as best as I can.
The repayment rate for the annuity loan would be around 4%.

Unfortunately, I don’t know the effective interest rate for the building savings contract loan (which is often seen as a disadvantage) – that’s why it’s so hard to compare. I tried to approximate it based on the interest costs and the other costs of the building savings contract accordingly.

Thank you both for your answers!

Best regards
Sven

It’s already good that you recreated everything in Excel. Prepayments are very effective as you have calculated.

But you also have to be willing/able to make them.

Everything somehow has its pros and cons.

The link doesn't work. But if you google "Tarifuebersicht_Via_Badenia_15_201606," I think you come to the appropriate tariff.

Ui, 7 per mille. That means that after the 10 years, when the building savings contract is used, you have to put 1960 EUR per month on the table for repayment and interest. The advantage is that the building savings loan is paid off after 6 years and 2 months.

that at the end of the 10 years there are 50% of the sum in the pot to secure the low interest rate

Already said; the building savings contract is not flexible. You have to reach the 50%. Otherwise, allocation maturity is not reached.

Assuming you do not reach 50%, that means not only switching to an "expensive" tariff with higher interest but also switching fees.

So flexibility exists only on paper.

The positive thing about this is that the costs/interest are foreseeable.

Also, you won’t make it with 1400 for the TA loan and the savings. I see a gap of about 14,000 EUR (I assume the interest for the loan is also paid from the 1400). So, only 1078 go into the savings in the building savings contract.
Otherwise, you would have a rate of 69+322+1400=1791 (which would be above your desired rate).

The problem I see is rather the following two parameters:

Monthly desired rate: approx. 1,500 - 1,600 EUR

(Planned) special repayment per year: 7,500 - 10,000 EUR (may vary slightly)

So you will have to put more on the table in 10 years, and you really have to make special repayments of 10k EUR to the KfW every year.

And I think that’s the catch. Special repayment is nice, but you shouldn’t count on it like that.

I also assume that the special repayment comes from "bonuses/gratuities" or similar. It’s hard to estimate how the company will develop over the next 10 years. Besides, there are always one or two expenses around the house.

And in your case, the building savings contract construct is fully designed for that. (In addition to the higher rate that becomes due after 10 years)