Combination Loan BSS vs. Annuity Loan

Hello Caspar,

thank you very much for your helpful tips, you mentioned some points that I had not yet considered with the building savings contract.

Link as per T&Cs deleted


For example, the 7 per mille - that refers to the original building savings amount, right?
That would indeed be enormous after 10 years.
So you would rather recommend the classic annuity loan?

Thanks & regards
Jens

The thing with the 7 per mille, for example – that refers to the original building savings sum, right?

Yes, that is the usual practice. Building savings contract sum, not the building savings contract loan amount. It also says in the PDF: Monthly repayment contribution in ‰ of the BSS.

These building savings contract constructs often have this "catch." The advantage of your building savings contract construct is security over the entire term regarding the interest rates.

However, it is also very, very ambitious.

With your annuity loan, you start with 4% repayment. That means with 1.7% interest, a rate of: 1,330.00.

And after 15 years, a remaining debt of 88,000 EUR.

Now your plan is to put in special repayments of 10k€ each into the KFW first, then you would still have 50k€ in the other 50k. Theoretically, that would only be 33k€. Then, it doesn’t matter how high the interest rate is.

But I don’t believe that. Let’s calculate more pessimistically:

No special repayments on the 280k loan. That means 88k€ after 15 years. Even if the interest rate were 8% and you don’t want to pay more than the 1,330 EUR, you would be finished in another 7.3 years. Would that be before retirement? So at the latest in 22.3 years?

Then there is still the KfW loan, which is very ambitious.

I would do two things:

[*]Take the annuity loan with at least one possibility to adjust the repayment (just in case).
[*]And consider fixing the 100k KfW loan for 20 years. I know that then it would be 1.30% (and over 10 years, 5,600 EUR more interest), but it would also give you significantly more flexibility.

I would do exactly as Casper. A home savings contract only makes sense for the providers at the current interest rates. Special drawing rights always yield more than paying into the home savings contract.

According to the new [Wohnimmobilienkreditrichtlinie], which has been in effect since 21.03.2016, your bank must provide you with a meaningful repayment plan. In addition, the topic of interest rate security and the development of the installments must be explicitly discussed with you and appropriately documented. Apparently, neither has been done in your case.
Upfront fees for the [Bausparvertrag] of 1.6% are also not insignificant; in my opinion, there are more affordable [Bausparkassen] with a tariff suitable for you.

I would rather allocate the special repayments to the bank/[Bausparkassendarlehen] instead of the [KfW]-loan. This way, you save the higher interest; after the fixed interest period expires, [KfW] will then offer you a new terms proposal, which is usually below the bank conditions valid at that time. But this is without guarantee, who knows what will still happen in 10 years.

Hello everyone,

first of all, many thanks for your help - truly amazing! I am really grateful to you
I also believe that we will increasingly move towards Caspar's model. That really sounds sensible. Regarding the question about retirement – that's still a while off, we are currently 29 and 32 years old. By the time we retire, the house should already be paid off, I think.
Thanks also for your pessimistic calculation, even that doesn't sound "too bad" – I will take another closer look at it.

Thank you all!

Best regards
Sven

Closing fees for the building savings contract of 1.6% are not insignificant either, in my opinion there are cheaper building societies with a tariff suitable for you.

It's quite okay. Considering the building savings contract interest rates. There are also ones with 1% closing fee, but interest rates over 2%. More of the problem with this building savings contract is the high repayment/interest rate (7 per mille) during the building savings contract loan.