Comparison of financing options - loan amount 430K

Good day everyone,

I have been reading here for a while, and now that we are also entering the decision-making phase, I would be interested to know how you compare the following two financing options.

The loan amount will be 430,000 euros, the fixed monthly installment will be 1,500.00 euros, special repayments are firmly planned and up to 5% of the loan amount annually are possible in both variants.

Option 1: Annuity loan with a 15-year fixed interest rate, nominal interest rate 1.25%, effective interest rate 1.29%

Option 2: Combination of a home savings contract pre-financing (160,000 euros) and annuity loan (270,000 euros)
The savings phase of the home savings contract would be 12 years, the interest rate for the repayment suspension loan for these 12 years 0.95%, interest rate of the home savings contract thereafter 1.5%. The interest rate for the annuity loan would be 1.25% nominal interest rate, as in the first option.

I am simply very unsure whether it would be better to at least secure part of the loan long-term via the home savings contract financing in option 2, even though this is of course overall more expensive in the first 15 years, or whether we should rather choose option 1, save the closing fee and the annual fees for the home savings contract, and rather repay the annuity loan as much as we can. In option 1, the remaining debt after 15 years (without including special repayments) would still amount to approximately 221,000 euros.

Thank you in advance if anyone has an opinion on this!

Best regards, Kate

I would have a 20-year fixed interest rate offered to me, the loan-to-value ratio should be quite good if I look at the conditions like this.

I would have a 20-year fixed interest rate offered to me, the loan-to-value ratio should be quite good if I look at the conditions.

I agree. We financed €418k with an 80% loan-to-value ratio. €100k for 10 years, €50k for 15 years, and €268k for 20 years The plan is to fully repay each loan by the end of its interest period. With this approach, you don't have to worry about the 21st year anymore. I am always in favor of splitting the amount if you have the possibility, because at each interest period you can decide whether to increase the repayment or continue with a smaller installment.

Thanks in advance for your answers.

The offer for a 20-year fixed interest rate on an annuity loan is already in progress, let's see how the interest rate turns out.

Splitting the amount, if we decide on this lender from whom the two aforementioned offers come, is rather out of the question. This is because we cannot change the repayment rate. A higher repayment can only be achieved through special repayments, which, as an advantage, can also be made monthly. So I can simply adjust our rate and would thus make monthly special repayments.

But if we now, for example, finance 100,000 euros over 10 years to take advantage of the favorable interest rate of 0.95%, then 330,000 euros remain, which we would then have to start (with an interest rate fix of 15 or 20 years) with a relatively low repayment rate in order to finish the 100,000 loan in 10 years. After 10 years, we would then have to continue with the same repayment rate on the large loan and make monthly special repayments. This would then leave hardly any room for "real" special repayments... I hope I have explained this clearly.
That means splitting the loan amount would be rather difficult here.

Best regards, Kate

Thanks in advance for your answers.

The offer for a 20-year fixed interest rate on an annuity loan is already in progress, let’s see what the interest rate will be then.

Splitting the amount, provided we decide on this lender from whom the two aforementioned offers come, is rather out of the question. This is because we cannot change the repayment rate. A higher repayment can only be achieved through prepayments, which, as an advantage, can also be made monthly. So I can simply adjust our rate and would thus make monthly prepayments.

But if we, for example, finance €100,000 over 10 years to take advantage of the favorable interest rate of 0.95%, then €330,000 remain, which we would then have to start with a relatively low repayment rate (with a fixed interest period of 15 or 20 years) in order to complete the €100,000 loan in 10 years. After 10 years we would then have to continue with the same repayment rate on the larger loan and make monthly prepayments. This would leave hardly any room for "real" prepayments… I hope I have explained this clearly.
That means, splitting the loan amount would be rather difficult here.

Best regards, Kate

A monthly prepayment is even better than my splitting. I only have the unlimited prepayment option on the €100k.

We financed the land with a variable rate and paid only €300 interest on €55k thanks to the unlimited prepayment option.

If you have the ambition and means to make monthly prepayments, take the 15 years and repay additionally with the monthly surplus.

A higher repayment can only be achieved through special repayments, which, and this is the advantage, can also be made monthly. So I can simply adjust our rate and thus make special repayments monthly.

Then calculate the difference between a monthly and an annual special repayment. It’s practically nothing at that interest rate. All penny-pinching. I see it like Zaba and I am very sure that with a clever split you can certainly get away a few euros cheaper.